TOGETHER WE MAKE LIFE BETTER

Valio Sustainability Report 2020 VALIO – SUSTAINABILITY REPORT 2020 3

CONTENTS

Cornerstone Frontrunner in P. 6 of sustain- P. 24 sustainability ability FINLAND’S MOST SUSTAINABLE BRAND FOR Responsibility Note: The icon in P. 62 obligations the top right corner THE EIGHTH will bring you back to the linked list of CONSECUTIVE contents TIME

CEO’s greetings...... 4 Cornerstone of sustainability...... 6 Strategy...... 8 ER NN 20 What does sustainability mean to Valio?...... 10 I 2 1 W Sustainability management...... 11 Owned by Finnish dairy farmers...... 20 Frontrunner in sustainability...... 24 Responsibility in customer and stakeholder collaboration...... 26 SUSTAINABLE Towards carbon-neutral dairy by 2035...... 32 BRAND INDEX Regenerative agriculture...... 40 Promoting biodiversity at dairy farms...... 45

Animal welfare is continuous development work...... 46 The people taking part in the Resource-efficient production plants...... 52 Sustainable Brand Index survey Efficient logistics means reduced emissions...... 54 Environmentally smart packaging...... 56 consider the Finnish origin of Innovations to promote health and wellbeing...... 60 Valio’s products, its animal welfare Responsibility obligations...... 62 and environmentally sustainable Respect for human rights...... 64 packaging as important. Safe products...... 70 Personnel wellbeing...... 74 Transparent supply chain...... 82 Risk management ...... 88 Governance and remuneration...... 90 This Sustainability Report describes Valio’s activities in 2020 and early 2021...... Environmental, Personnel and Economic information 98 It covers operations in Finland and, Reporting scope...... 105 in part, in other countries. The figures GRI table...... 106 in brackets are from 2019. VALIO – SUSTAINABILITY REPORT 2020 5

their work. The requirements include, for NEW STRATEGY AIMS medium and long term and to maximise the VALIO’S example, preventive health care for the FOR GROWTH price paid for raw milk to the co-operatives cows. We are continuing to develop the and, consequently, to the dairy farmers. sustainability programme. We updated our strategy in 2020. Business Throughout the 2000s, Valio has been able SUSTAINABILITY WORK operations focusing on milk in the domestic to pay Finnish milk producers a higher price HOME COOKING INCREASED market continue to be our strongest area, for milk than the European average. PROGRESSED IN and we will continue its further development. The coronavirus pandemic affected Valio’s YEAR 2021 operations in all markets. People stayed at Raw materials and solutions that generate THE PANDEMIC YEAR home and cooked for themselves, boosting added value for our industrial customers The first half of the year has started with a retail sales. Eating in restaurants and staff is an important new focus area, whereby continuation of the coronavirus pandemic. The exceptional pandemic year showed us that food security and canteens fell away, so hotel, restaurant and we are seeking growth globally, for example In line with strategic focus areas, we will sustainability are issues that are more important than ever. catering (HoReCa) sales decreased. in Asia. We also see potential for growth in continue to invest in new growth, operational plant-based products, where we are further efficiency, and improved profitability in 2021. During the pandemic, sustainable food eighth consecutive time in the Sustainable print and are working to reduce it. Did you In spite of the challenging year, we were able developing our offering as well as looking to and the security of food supply became Brand Index survey. We are sincerely thank- know that the carbon footprint of milk in to secure our employees’ health and well- export markets. In addition, we are continuously Looking after the wellbeing of our even more important. Many in Finland ful for that and we will continue our efforts. Finland is more than 50% smaller than being, and we were able to maintain normal evaluating new business opportunities and personnel and our dairy farmers remains began to notice the kind of strength it is the global average? production and excellent delivery reliability. partnerships. our priority so that we can continue our to have vibrant domestic agriculture and PART OF THE CLIMATE efforts towards carbon-neutral milk and food companies during a crisis. CHANGE SOLUTION The first milk truck using biogas produced Valio’s financial success is measured with CONTRACT PRODUCTION SECURES our other sustainability targets. at a farm commenced milk collection at a milk margin and a milk return. Despite THE FUTURE OF DAIRY FARMS Valio is a co-operative-based company We have an ambitious goal to reset milk pro- the beginning of 2021 at the Vuorenmaa the coronavirus pandemic, we recorded I want to thank all Valio people, dairy farms, that is owned by 4,300 Finnish dairy farmers. duction’s carbon footprint to zero by 2035. dairy farm in Haapavesi. a good financial performance and the milk Valio and the milk procurement co-operatives our customers, and partners for the good We want to be a part of the solution to The exceptional year did not influence the return continued to grow. The milk margin switched to contract production at the collaboration and the solution-focused, global challenges: we are aware of our progress of our work, on the contrary. We started a three-year project together amounted to EUR 861 million (EUR 838 beginning of 2021. Contract production forward-looking spirit! We can be proud of environmental and climate impacts and with the Natural Resources Institute million), and the milk return was 41.5 means that the milk procurement co- the Finnish food chain. take active measures to reduce them We set Science Based Targets on climate. Finland to study cultivation methods that cents per litre (41.2 c/l). operatives supply a pre-agreed volume through regenerative carbon farming, The target is to reduce by half the green- reduce emissions from peatlands. of raw milk to Valio. Better predictability of manure-based biogas, and other production house gas emissions from milk production Valio Group net sales were EUR 1,808 the total milk volume is necessary so that plant- and farm-specific emission reduction per litre of raw milk taken in, by 2030 IMPROVING ANIMAL WELFARE million (2019: EUR 1,787 million), up 1.2% we can adjust production capacity measures. At the same time, we are purpose- compared to 2019. on the previous year. Domestic net to market demand. fully improving animal and human welfare. As of the beginning of 2021, all 4,300 sales decreased by 0.9 percent, and Annikka Hurme We launched an environmental calculator Valio dairy farms have committed to the international net sales rose 4.3 percent. The goal of contract production is to CEO It was a great honour to be chosen as the for dairy farms; already more than 600 sustainability criteria for animal welfare Read more in the Financial Statements >>> secure the future of dairy farms in both the most sustainable brand in Finland for the farms have calculated their carbon foot- and receive a sustainability bonus for VALIO – SUSTAINABILITY REPORT 2020 7 CORNERSTONE OF SUSTAINABILITY

2020 VALIO – SUSTAINABILITY REPORT 2020 9

Valio’s values are Consumer and Our vision is to be the leader in innovative in their daily work. We have the ability to customer focus, Responsibility, Renewal, dairy and food solutions. Innovativeness develop high-quality solutions for our STRATEGY and Collaboration. We consider things is visible not only in product development, customers’ needs. The spirit of Nobel from the perspective of consumers and but also in all the other activities we do. Laureate A.I. Virtanen lives on in our Valio’s vision is to be the leader in innovative customers. We operate responsibly as corporate culture and encourages renewal. dairy and food solutions. 4,300 Finnish dairy part of society, and we take personal Our strategic target is to have among the farms own Valio through cooperatives. responsibility. We are open to change, best profitability in the industry and to be Our strategic target is based on our owner We buy the milk we use in Finland from and we act in an agile way. We help each the most wanted partner for our customers. strategy. Our priority is to ensure the our owners, and we pay all our operating other to achieve the best results in We engage in our customers’ world and we livelihood of dairy farmers in the different a solution-oriented way. offer the best customer experience. parts of the country. Our target is to pay profit to them. a producer price that is at the level of the Our mission is Our most important asset is our committed best cooperative dairies in Europe. We “Together We Make Life Better”. and capable people who turn innovations exceeded the EU average producer price into solutions and implement the strategy throughout the 2000s.

OUR STRATEGY

VALUES: WHAT IS MISSION: VISION: Consumer and customer GUIDING OUR Together we make Leader in innovative focus, Responsibility, ACTIONS? life better dairyand food solutions Renewal and Collaboration

WHAT ARE OUR PROFITABILITY: OUR STRATEGIC TARGETS? is among the best and we are the most wanted partner for our customers

WHAT IS OUR COMPETITIVE COMMITTED AND CAPABLE PEOPLE TURNING INNOVATIONS INTO SOLUTIONS ADVANTEGE?

WHAT IS Dairy centered Global ingredients Food inselected Exploration OUR business in home and solutions markets businesses PLAYFIELD? markets VALIO – SUSTAINABILITY REPORT 2020 11

We produce healthy food to fuel every- Our goal is A cooperative approach and Valio’s shared day life and to enjoy, and we bring people values, mission, and vision are the corner- WHAT DOES together around food. TO CUT THE stones of our operations. Valio’s Code of CARBON Conduct and other policies, such as our Food production is based on the resources Marketing and Environmental policies, SUSTAINABILITY FOOTPRINT nature gives us. We are aware of our guide our operations. environmental and climate impacts, OF THE MILK MEAN TO VALIO? and it is our responsibility to reduce them. CHAIN TO ZERO In 2020 we created a clear sustainability We reduce emissions, grow carbon sinks, management model: decision forums Food consumption and food production have and create circular economy solutions. BY 2035 and operative teams for environmental, globally significant impacts on the environment, We work to increase biodiversity. At the economic, and social responsibility society, animals, and people’s lives. same time, we improve animal welfare. issues. We set focus area targets that We create thousands of jobs, and we were approved by the Valio Executive ensure the preservation of profitable Board. The new governance model food production in Finland. streamlines the decision-making and follow-up related to overall sustainability. We want to do our part in solving global The realisation of sustainability is regularly challenges. Responsibility for the reported to Valio Executive Board in environment, the economy, people, and the sustainability forum. society is embedded in everything we do.

Combating climate change is one of our focus areas.

SUSTAINABILITY MANAGEMENT

Valio’ sustainability is led by the head of Sustainability and Stakeholder Relations, who is also a member of the Executive Board. Sustainability is part of everything we do, in all our market areas. VALIO – SUSTAINABILITY REPORT 2020 13

FOCUS AREAS OF SUSTAINABLE BUSINESS THE UNITED NATIONS SUSTAINABLE DEVELOPMENT We have identified the topics that are especially important to Valio’s stakeholders and through GOALS FOR 2016–2030 which we create wellbeing for society. We also pursue business benefits from these areas. aim at eliminating poverty and improving wellbeing We want to be a frontrunner in promoting wellbeing and sustainable lifestyles, in advancing with the environment in mind. the target of a carbon-neutral milk chain, and in securing nature’s vitality. We have set targets for each focus area, and we monitor the progress.

REGENERATIVE AGRICULTURE Use of grasslands INNOVATIONS FOR • Carbon farming training and and milk production Healthy products All profit WELL-BEING implementation of practices on farms are necessary to feed that promote to the milk CA growing population, wellbeing producers • Nutritious & healthy RB FO O choices S O N food security LE D - CIRCULAR OPERATIONS Y N & T C E H U • Generating biogas from manure G S E A T N F I R • Sustainable energy solutions in I I LEADER N E A L B L logistics and factories ENVIRONMENTALLY E in innovative - L L

B SMART PACKAGING L dairy and food Work towards E A

• Reduce, Replace, Recycle N Energy efficiency, W I solutions EMISSIONS REDUCTIONS Promotion of carbon-neutral milk • Our commitments A resource efficiency,

T IN FARMING AND MILK (e.g. carbon farming, S Drive sustainability equality and for sustainable packaging

U PRODUCTION food waste reduction, reducing fossil fuels

G S in all our operations preventing • Food waste N circular economy, and markets I discrimination in production and H E packaging IS R logistics) R U BIODIVERSITY RECOVERY U T SUSTAINABLE O A • Biodiversity roadmap N N

SOLUTIONS FOR OUR CUSTOMERS AND SOCIETY • Superior expertise & reliability ANIMAL WELFARE SUSTAINABLE • Sustainability bonus • Skills and capabilities of our people VALIO’S SUSTAINABILITY • Food Safety & Food Security LEADERSHIP Circular economy in Animal welfare, primary production, promoting ACTS ARE ESPECIALLY Laws and regulations, Code of Conduct, reducing effect on biodiversity at COMPLIANCE Policies, Human rights, Sustainable LINKED TO THESE water system (COD) dairy farms operations and supply chain EIGHT TARGETS

Valio Value’s, Mission and Vision, FOUNDATION Dairy Farm Co operatives VALIO – SUSTAINABILITY REPORT 2020 15

KEY TARGETS OF The reduction of dairy farm GHG emissions is monitored SUSTAINABLE BUSINESS with the CARBO® environmental calculator. In April 2021 Increase emissions-reducing actions, more than 600 dairy farms have calculated the carbon like carbon farming, increasing the grass footprint, 1,000 farmers trained in using the calculator. REGENERATIVE harvest, improving animal welfare, and THEME TARGET PROGRESS IN 2020 AGRICULTURE improving feed use. Average carbon footprint of dairy farms is 0.8–1.3 kg CO2e/kg energy-corrected raw milk (ECM). Global average is about 2.5 kg CO2e/kg ECM (FAO). Nutritional commitments:

1. Nutritionally recommended, climate-friendly 1. Recipes are ready. Biogas plant at 15 Valio farms, 14 of which provide recipes for the home cook: 10 recipes by 2021. energy for the farm’s own needs. The biogas plant at INNOVATIONS 2. Progressing as planned: Increase the use of manure in the Vuorenmaa dairy farm in Haapavesi also functions 2. Double the Heart Symbol recipes for six Heart Symbol recipes published. TO PROMOTE the circular economy by using it in the as a biogas refuelling station. Finland’s first manure professional kitchens: 12 new recipes by 2022. HEALTH AND 3. 10 everyday recipes shown in CIRUCULAR production of biofuel, phosphorous and biogas-powered milk truck fills up at the farm. WELLBEING 3. Valio.fi recipe service’s everyday recipes: plate model format. nitrogen fertiliser fractions and bedding. ECONOMY Three new biogas trucks were acquired for milk collection. encourage more vegetables in the diet. Now a total of 5 biogas trucks in the logistics. 20 recipes by 2022.

We mapped our impacts on biodiversity. We started Packaging commitments: Map our impacts on biodiversity and planning a biodiversity roadmap in spring 2021. It will be • Eco-smart packaging in 2025. reduce the adverse impacts, as well as completed in 2021 and contains measures for recognising • Towards a circular economy and minimising 1. Microbiological product remarks BIODIVERSITY increase actions supporting biodiversity. the biodiversity of Valio dairy farms and Valio’s production climate impacts. from consumers 3.4 ppm (-1.3 units) and procurements. Valio Finland 2. Amount of plastic 6 million kilos (-8%) The target was achieved. All Valio dairy farms have committed ENVIRON- 1. Minimising food waste 3. Share of plant-based packaging Get all Valio dairy farms to commit to to the sustainability bonus criteria. A sustainability bonus of Reducing the amount of product spoilage. Indicator: materials 72% (+3 percentage points) the sustainability bonus criteria 2 cents per litre is paid. Development of the sustainability MENTALLY ANIMAL SMART Number of microbiological product remarks/ 4. All packaging sold in Finland is suitable for by the end of 2020. bonus programme will continue. million products sold 1.0 ppm. 2019: 4.7 ppm. WELFARE PACKAGING collection systems that allow recycling. Verifying the welfare of dairy cattle. We have started a project that is planning a welfare index 2. 20% less plastic. 2019: 6.5 million kg. Plain-language recycling instructions for dairy cattle and its adoption. 3. Plant-based packaging materials. 2019: 69%. on packaging: started in 2020 4. Circular economy – packaging suitable To ensure Examples of actions in 2020: for collection systems responsible business, we Carbon farming training with Baltic Sea Action Group continued. 300 farms trained. work in 1. Science Based Targets approved in April 2021: We helped to develop BSAG’s E-College for regenerative agriculture. The free, science- collaboration Milk’s carbon footprint emissions reduction based online course on regenerative farming practices was opened in spring 2021. 1. Get approval from the Science Based Targets RESPONSIBILITY with our target at the farm level -50%, energy used by initiative for Valio’s emissions reduction targets IN CUSTOMER AND customers, In the Valio-led CARBO project, we worked with top research groups and grass chain CLIMATE production plants -47%, milk collection logistics set by Valio in 2020 to limit climate warming STAKEHOLDER various experts: Finnish Meteorological Institute, Natural Resources Institute Luke, TARGETS FOR -28% by 2030 from 2019 level. to 1.5 degrees. COLLABORATION organisations University of Eastern Finland, Yara, and Atria Tuottajat. The research and development VALIO AND 2. Progress in several measures in the milk chain, and experts. projects focused on the carbon binding of grass and the efficiency of grass farming. 2. Cutting the milk chain’s carbon footprint Valio’s climate impacts are calculated annually We monitor Several thematic events and webinars. DAIRY FARMS to zero by 2035. in accordance with the international Greenhouse trends and listen Gas Protocol. to consumers. Sustainable sourcing experts, e.g. NGOs, involved in human rights impacts assessment. VALIO VALIO – SUSTAINABILITY REPORT 2020 the choices consumers make the and operations of Changes in the operating environment impact exported to about countries 60 around the world. Valio’s roots are in Finland, our and products are AND ENVIRONMENT OPERATING opportunities risks –and –for Valio’s business. At the time, same changes create new professional kitchens our and industrial customers. TRENDS

consumers’ diet but diet but consumers’ milk consumption consumption milk and consumption will move towards move towards will Dairy products products Dairy home markets declines in our indeclines our will remain in in will remain developing markets Consumer behavior is evolving towards more flexible, sustainableand convenient consumption AND OPERATIONAL ENVIRONMENT CHANGES OPERATIONALAND CHANGES ENVIRONMENT Sustainability Sustainability importance increase its its increase will further will further appear as behavioral patterns that form the base for choices that strategic our form base the patterns behavioral as appear diet especially diet especially in consumers’ in the western western in the Plant-based Plant-based their role their role diets will will diets increase increase markets FOOD TRENDS TRENDS FOOD

Purchasing power especially in Asia in Asia especially

will become part part will become Kuva: Unsplah more and more more and more dairy products products dairy in in growing countries is of diet the of developing people , and , and requirements for flexibility unexpected unexpected changes will changes set further set further Rapid and Consumption move tonew and delivery delivery and increasingly increasingly of will food channels 17 VALIO – SUSTAINABILITY REPORT 2020 19

THE PANDEMIC STARTED A COOKING BOOM Key pandemic effects on consumer food habits and preferences

Our annual analysis of consumer trends gives us insight into the factors that impact food and eating. GAINED IMPORTANCE REDUCED IMPORTANCE We develop products and services to meet people’s changing hopes, needs, and emotions. SNACKING facing economic hardship will likely OUT-OF-HOME AND ON-THE-GO The coronavirus pandemic impacted food habits in many ways. People stayed home, cooking and baking a lot. Eating at restaurants The shift to a stay-at-home lifestyle has be less willing to pay a premium for With consumers forced to stay home and workplace canteens decreased. You can read about the impacts the coronavirus had on Valio’s business in the CEO’s review >>> resulted in a mixed overall effect on the sustainability, and concern over more as well as avoiding or limiting time snacking category as whole: on the one packaging and plastic waste could in public spaces, consumption in the hand, on-the-go snacking and snacking (temporarily) be set on hold, as out-of-home and on-the-go category Key pandemic effects on consumer food habits and preferences out-of-home is down, on the other hygiene grow in importance decreases, as do all type of food snacking (and indulgence) at home consumption related to hostility GAINED IMPORTANCE during the day are generally up PRICE SENSITIVITY experiences (restaurants, hotels, Unlike a general recession, the economic bars etc.) IN-HOME COOKING & BAKING PLANT-BASED FOODS 40% of Nordic consumers reporting SUSTAINABILITY effects of the pandemic have so far More than anything else, the pandemic Perceived as a source of natural health, valuing food produced in their own So far, research suggest a mixed effect been unevenly distributed in society. Novelty & ExperimentationFaced with has brought about a surge in in-home sales of plant-based foods, in every- home country higher now than prior of the pandemic on consumers con- As a result, the price sensitivity of chaotic and uncertain times, as well cooking, with for instance one US thing from fresh fruit and vegetables to the pandemic cern for sustainability. On the one hand, consumers tends to be polarized, as (for many) economic hardships, study indicating that more than 60% to plant-based meat have grown, with more than one survey suggest that with both low-end budget and high- consumers in general are less likely of consumers reporting cooking more one study finding that 20% Europeans ONLINE SHOPPING overall sustainability concerns have not end premium food segments able to seek out new, novel and unfamiliar at home as a result of the pandemic, reporting buying more fruit and Whether in the form of online grocery decreased (and might even have inc- to grow simultaneously experiences, brands or products driving global demand for everything vegetables as a result of the pandemic. shopping, online food ordering or reased). On the other hand, consumers from baking goods to fresh fruits and consumer buying directly from branded vegetables COMFORT & INDULGENCE channels (D2C), the pandemic has As a means of bolstering overall mood accelerated the shift to digital channels HEALTH, WELLBEING & IMMUNITY and alleviating the mental toll of the with for instance Swedish grocery In addition to putting health-issues pandemic, consumers have increasingly e-commerce sales up 79% in H1 2020. higher on the agenda for consumer in turned to food and snacks that provide general, the COVID-crises has put the sense of comfort and indulgence BIG, SAFE AND FAMILIAR BRANDS risk of obesity and diabetes front and Particularly evident during the center, all in all resulting in increased LOCAL & DOMESTIC beginning of the pandemic but with demand for healthy food in general, Whether due to local food feeling safer, signs of persisting, consumer as well as food boosting everything healthier and more trustworthy, or preferences (regardless of CPG- from the immune system to gut- due to a wish to support national food category and including food and and mental health. self-sufficiency, the pandemic has drinks) has shifted to bigger and more increased demand for locally produced familiar brands and the expense of food goods, with for instance almost smaller and less well-known VALIO – SUSTAINABILITY REPORT 2020 21

In Finland, we source milk from our owners; HOW IS THE MILK PRODUCER in Estonia and Russia, we make products 4,300 PRICE DETERMINED? from local milk according to strict quality FINNISH OWNED BY requirements. Valio’s Board members are dairy farmers Read more here >>> DAIRY themselves. They assess how much Valio FARMERS can afford to pay the cooperatives for the FINNISH DAIRY 4,300 Finnish dairy farmers own Valio OWN VALIO milk. The milk price depends on how well through 14 cooperatives. The number of Valio’s various products, from yoghurt to dairy farms decreased in 2020 by nine per THROUGH cheese, are selling and on how profitable FARMERS cent, but the milk volume increased slightly 14 CO- sales have been. to 1.8 billion litres. In Finland, milk is produced Finnish dairy farmers own Valio. We pay all of our on relatively small farms: in 2020, Finnish OPERATIVES In 2020, the average price Valio paid for operating profit to them through regional cooperatives. dairy farms had 44 cows (42), on average. milk was 40.9 cents per litre (39.9). Valio When you choose a Valio product, you can be sure that In Sweden, for example, the average was was again able to pay a price higher than the money goes to the producer. 93 cows per farm, in Denmark 227, and average European price. The cooperatives in Holland 102. (Source: ProAgria Output pay the producer price to the farms. monitoring results 2020). A VARIETY OF SERVICES WE CREATE JOBS AND FOR DAIRY FARMS LIVELIHOODS FROM SOUTHERN FINLAND TO THE ARCTIC CIRCLE Dairy farmers are real multitaskers. Their work includes growing fodder crops, taking Milk production is the only form of agriculture care of animal welfare, ensuring milk quality, that is possible everywhere in Finland. The financial planning for the business, farm majority of our dairy farms are located in development, and more. Valio’s primary Ostrobothnia and in eastern and northern production services offer the farms advice Finland at latitudes where only a few food and training on these issues. In 2020, there crops cultivated directly for people grow were 190 trainings held. well. One farm employs an average of three people in a year. In addition to farmers, also needed are veterinarians, relief workers, machine servicing technicians, barn builders, and excavating contractors. VALIO – SUSTAINABILITY REPORT 2020 23

DAIRY FARMERS ARE MEMBERS OF COOPERATIVES

In January 2020 we celebrated Valio’s NUMBER OF DAIRY FARMERS IN FINLAND THAT IN TURN OWN VALIO 115-year journey with a Baltic Sea AND AVERAGE FARM SIZE (YEAR END) cruise including 730 dairy farmers as well as employees from Valio and the cooperatives. Farmers producing organic milk of the total number of Valio and the health care company milk producers: Roughly 4,300 The cooperatives dairy farmers in pay out PRODUCER Mehiläinen have an agreement that 20 • 2000: 101 the cooperatives PRICE TO gives the dairy farmers easy access to • 2005: 133 THE FARMS Mehiläinen’s occupational health care 18 17,000 • 2010: 106 network. The health care service for 5 16 agricultural entrepreneurs helps and • 2015: 127 • 2019: 118 provides advice in maintaining and 14 13,000 improving health, working capacity, • 2020: 113 and resilience. 12

10 The board decides Employment pension insurance for dairy 9,000 VALIO’S BOARD

1,000 farms farms 1,000 THE MILK PRICE FOR 4 dairy farmers farm workers has been possible since the 8 CO-OPERATIVES beginning of 2020 through Valio’s pension 6,500 6 fund. The pension fund generates benefits 4,700 4,300 for its members, i.e. the dairy farmers, with 4 competitive insurance premiums. For the insured workers, having their own pension 2 1 fund is a convenient service with a century 79% Valio Group 0 procurement of experience in the sector. 2000 2005 2010 2015 2019 2020 of Finland’s cooperatives 2 milk 1. Evijärvi 2. Maitosuomi 2000 2005 2010 2015 2019 2020 3. Länsi-Maito 3 Cows / farm 16 20 26 35 43 44 4. Tuottajain Maito 1,800 5. Pohjolan Maito 4 million litres of Total 14 cooperativesas owners, including milk per year competitors VALIO – SUSTAINABILITY REPORT 2020 25 FRONTRUNNER IN SUSTAINABILITY

2020 VALIO – SUSTAINABILITY REPORT 2020 27

We want to be transparent and we second amongst all 25 Foodservice communicate widely with various stake- WE INTERACT suppliers assessed. Customers RESPONSIBILITY holders through in-person meetings and WITH DIFFERENT consider our products as important events, Valio’s online service and social STAKEHOLDERS and of high quality. Product development IN CUSTOMER AND media channels, our consumer service, and learn from each other is valued and we are trusted. The customer and owner magazines, and reaction and communication during newsletters. Additionally, we participate the coronavirus pandemic was also STAKEHOLDER in various research and cooperation appreciated. projects with universities, research institutes, and other companies. • Professional kitchens and food COLLABORATION industry: In Onway’s 2020 survey, In 2020, Valio’s reputation rose to an Valio’s Net Promoter Score (NPS) Valio’s most central stakeholders all-time high level of 3.86 (3.65 in 2019) was excellent and further improved are dairy farmers, i.e. Valio’s owners, in T-Media’s annual Reputation & Trust from the previous year to 84 (82). personnel, customers, consumers, survey. Valio was Finland’s most sustainable Customers especially value the goods and service providers, as brand in the corporate responsibility Finnish customers at over 99 per cent also professionalism and good service of well as societal decision-makers survey Sustainable Brand Index™ for the during the exceptional year. We communicate Valio employees and the products. and influencers. Identifying different eighth consecutive year. People consider about product defects or errors, recalls, and Valio’s Finnish origin, animal welfare, and distribution disruptions openly and quickly. MILLIONS OF ENCOUNTERS expectations and taking them into sustainable packaging as important. WITH CONSUMERS account are the cornerstones of Our customers gave us high Valio’s stakeholder work. We interact VALUED PARTNER ratings in surveys: Valio.fi is one of Finland’s most popular with local and national stakeholders FOR CUSTOMERS food sites. It sees more than 500,000 and learn from each other. • Grocery store business: In 2021 we unique visitors every week. We answer Valio’s customers include grocery store were number one in Factum’s Grocery questions about our products and our chains, restaurants, service stations, the Central Buying survey, both in our company through the contact form, food industry, nutritional service providers, peer group and among 32 fresh- in phone calls, and on social media. and bakeries. Valio Food Solutions serves product suppliers. Responsibility, professional kitchens and the food industry reliability, security of supply, decision- • In a continuous quality survey, in Finland and around the world. making ability, and competence are Valio’s consumer service was rated aspects our customers value. 9/10. Respondents appreciated the For us, it is important to be a reliable speed, friendliness, and expertise partner to our customers. We succeeded • Foodservice: In 2020 we were the of the service. in keeping the delivery reliability to our best in our peer group, and we ranked VALIO – SUSTAINABILITY REPORT 2020 29

• We responded to more than 20,000 decent, honest, and truthful. Valio’s coaching. Product stipends provide snacks consumer contacts. These contacts Responsible Marketing Policy sets forth for training or game travel. Event stipends were nearly evenly split among product the principles for all Valio markets. can be granted for, e.g., a sports tournament. remarks and questions, wishes, and ideas. Consumers were especially VALIO AKATEMIA SUPPORTS VALIO’S ADVISORY BOARDS interested in product-related matters. YOUTH SPORTS AROUND FINLAND

RESPONSIBLE MARKETING Valio Akatemia® supports youth physical We are increasing transparency in our COMMUNICATIONS exercise hobbies and wellbeing by awarding operations and engaging in dialogue with stipends and by promoting healthy life- communities in Valio’s operating areas: We are committed to the responsible styles. Since 2013, about 1.1 million euros what is deemed as important in the role of marketing of our products, our services, have been granted to 2,200 stipend Valio and its milk production, what should and our operations. Our marketing recipients. Cash stipends are intended we develop, and what expectations do our communications are compliant with to pay for participation fees and the like. stakeholders have? We invite regional MPs applicable laws and regulations, and are Nutritional stipends include nutritional as well as leading officials, customers, and

CASE NEW LOOK FOR YOGHURT SERIES

The product packaging illustration on Valio’s “Turkish” yoghurt sparked public debate and media attention in spring 2020.

Already prior to this debate, the need to update the packaging had been recognised at Valio because the packaging wasn’t consistent with Valio’s renewed marketing policy. In accordance with the marketing policy renewed in spring 2020, Valio’s marketing doesn’t disseminate national, racial, or religious discrimination or harassment. Therefore, the decision was made to renew the packaging. The updating of the marketing policy is related to the human rights assessment we started in 2019. Harassment and discrimination, among other things, were reviewed in the assessment. VALIO – SUSTAINABILITY REPORT 2020 31

experts from various fields to Valio’s in the Nordics, we promote responsibility Valio is a corporate member of EUCOLAIT advisory boards. No events were held in expertise and collaboration. (European Association of Dairy Trade) CASE 2020, due to the coronavirus pandemic. and EWPA (European Whey Producers We aim to continue them in autumn 2021. Valio is a member of the Finnish Association Association). EDA and EUCOLAIT have AIMING FOR JUST FOOD of Purchasing and Logistics LOGY. Through influence in European Union decision- YOUNG PEOPLE LEARN WORKING the expert network, we receive information, making related to the dairy sector. EDA Valio is a partner in the six-year Just Food research project funded by LIFE SKILLS IN YRITYSKYLÄ training, experiences, contacts, and good is focused on the dairy industry, and the Strategic Research Council of the Academy of Finland. practices for responsibility development EUCOLAIT focuses on trade. Yrityskylä is a Finnish learning concept that related to logistics and procurement. We Project participants include the Finnish Environmental Institute, the Natural Resources Institute has been recognised as the world’s best are also involved in many other similar In Finland, Valio is a member of the Finland, the Finnish Institute for Health and Welfare, the University of Jyväskylä, e2 Research, education innovation. Its aim is to offer professional networks of experts. Finnish Food and Drink Industries’ and the University of Bern, Switzerland. The project is examining how the changes needed in students in grades six and nine positive Federation (ETL), the Finnish Organic the food system could be implemented fairly for everyone; the goal of the research is to produce experiences with working life, the economy, NATIONAL AND INTERNATIONAL Food Association (Pro Luomu ry), and the information to support decision-making. and society. Yrityskylä students have the ADVOCACY Animal Health ETT association. ETL shapes opportunity to head companies, and the the operating environment for food industry Within the framework of the project, 18 Valio dairy farmers, advisors from the milk procurement experiences have been very positive. Valio is involved in both European and companies, so that the companies have cooperatives, and Valio employees were interviewed in 2020. The interviews provided important There are Yrityskylä learning environments international dairy industry advocacy. good prerequisites to succeed in Finland information about what dairy farmers think about climate change, its mitigation in the milk in eight regions in Finland. Valio is one of The aim is that decision-makers have a and internationally. Through the ETL chain, and the fairness of the suggested climate actions and the entire climate discussion. the participant companies among sufficient understanding of industry- membership, Valio participates in the dozens of partners. specific aspects and the facts needed to activities of the Confederation of Finnish support decision-making. Valio is registered Industries (EK). Pro Luomu promotes the In Estonia, Valio’s plants opened their in the transparency register maintained goal-oriented development and growth doors to employees and their children as by European Parliament and Commission, of the organic sector. Animal Health ETT part of an Estonian Chamber of Commerce and is committed to compliance with its promotes the health and welfare of initiative. The goal was for children to learn code of conduct. production animals. It coordinates the about the working life of their parents. health care services for cattle and main- Valio’s international and Finnish advocacy tains the national health care register DEVELOPMENT OF RESPONSIBILITY is handled by the Milk Refiner and Dairy for cattle farms Naseva, which documents EXPERTISE AND SHARING OF Wholesaler Association (MML). MML is a the data on quality. PROFESSIONAL EXPERTISE member of the European Dairy Association (EDA) and the International Dairy Federation Through our membership in FIBS Pro, the (IDF). IDF participates in making inter- largest corporate responsibility network national standards and promotes sustainable milk production. VALIO – SUSTAINABILITY REPORT 2020 33

While it is an ambitious goal, it is reachable or grass silage. The fibrous side streams through collaboration between Valio and from grain refining and the food industry its dairy farms, agricultural and energy – side streams that otherwise would have TOWARDS sector companies, and research institutes. no use – are also used in feeding. A commonly We carry out research collaboration with, used protein feed is canola or rapeseed e.g., VTT Technical Research Centre of meal, which are also by-products of the CARBON-NEUTRAL Finland, Natural Institute Finland Luke, plant oil industry. The use of imported soy and the University of Helsinki. as feed is forbidden in the Valio Group.

DAIRY BY 2035 MILK PRODUCTION IN FINLAND With grass-based milk production, it is IS BASED ON SUSTAINABLE possible to bind carbon from the atmos- We are aware of the environmental impacts of milk GRASSLAND FARMING phere into the land, i.e. into the mineral soil production and we are actively reducing them. of fields that have less organic material. Our goal is to cut the carbon footprint of Valio’s milk A substantial part of Finnish fields are Perennial grass can be used also to reduce chain to zero by 2035. A carbon-neutral milk chain suitable only for producing grasses. greenhouse gas emissions caused by Cultivating protein crops and bread grains cultivating organic lands, like peatlands, means that at least the same amount of emissions is economically feasible mainly in the compared to cultivating annual crops like is reduced and removed from the atmosphere as southern and south-western part of grains. Additionally, perennial grassland is generated on dairy farms, in transportation, Finland. In a large part of the country, effectively binds nutrients into arable at the plants, in the manufacturing of packaging, grasses yield a more reliable harvest than soil and thus reduces nutrient runoff into and elsewhere along milk’s journey from the farm grains and protein plants, and they yield water systems. to the grocery store. Our work focuses on a more abundant harvest per hectare of reducing emissions, not offsetting them. arable land. MILK PRODUCTION AS PART OF With cattle it’s possible to produce high- THE CARBON CYCLE quality food products in areas where food crops do not thrive. As ruminants, cows Climate change means an increase in the convert grass and other fibrous fodder greenhouse gases that warm the climate crops into milk and beef. in the atmosphere. Carbon plays a key role, as it cycles between the atmosphere, About 75 per cent of the fresh weight of plants, organisms, and land. the fodder eaten by cows is pasture grass VALIO – SUSTAINABILITY REPORT 2020 35

Carbon is everywhere. Milk production both manure pits and reduces the need for fossil GREENHOUSE GAS EMISSIONS, VALIO FINLAND: 2.3 MTON CO e/KG CARBON CYCLE releases carbon into the atmosphere and fuels in society. By strengthening the circular 2 OF A CLIMATE-SMART DAIRY FARM sequesters it. Plants sequester atmospheric economy and utilising technology, the Greenhouse gas emissions from milk production can be reduced by sequestering carbon more carbon through photosynthesis. Some of carbon cycle of milk production becomes efficiently into land, by reducing the gases released from peatlands, and by producing biogas from the carbon is sequestered in the under- more efficient and the environmental 2019 2020 manure. Healthy and productive animals are the cornerstone of climate-smart dairy farm operations. ground roots and microbes, and the rest impacts decrease. in the above-ground vegetation that cows eat as feed. Some of the carbon contained VALIO’S CLIMATE Heat (scope 1) in the feed is released into the atmosphere IMPACTS IN 2020 Heat and electricity (scope2) Low methane as methane, a by-product of the ruminant Raw milk CH4 emissions digestive process; some of the carbon is Greenhouse gas emissions from Valio’s Other raw materials, packaging, and cleaning agents transferred through manure and urine to operations in Finland in 2020 were about Logistics

2 manure pits, and ultimately back to the 2.3 million carbon dioxide equivalent Waste

CO PHOTOSYNTHESIS From biogas plant Work commute and business travel fields as fertiliser. The rest of the carbon tonnes (Mton CO e). Received raw milk Plants bind carbon to CH4 fuel 2 Investments, energy production, from the atmosphere PEATLAND remains in the cow’s organs, with some accounted for 79% of this, energy use at and use of products in vegetation, in CO2 from manure pit Climate emissions from transferring into the milk. plants accounted for 7%, and logistics for feed, and in soil MINERAL SOIL Reject from manure and biogas plant peat decomposition Soil carbon sinks grow with can be mitigated with and biogas plant 2%. The rest of the emissions were related 2 regenerative farming practices to fertilise grass suitable farming Utilising cow manure in biogas production to other raw materials used in product practices CO Carbon and nutrients reduces greenhouse gases released from production, packaging, waste processing,

GREENHOUSE GAS EMISSIONS FROM VALIO’S FINNISH OPERATIONS IN 2019 AND 2020 Reporting method >>>

2 INVESTMENTS, OTHER RAW HEAT AND WORK COMMUTE ENERGY Carbon HEAT MATERIALS, CO ELECTRICITY RAW MILK LOGISTICS WASTE AND BUSINESS PRODUCTION, Unit (SCOPE 1) PACKAGING, AND (SCOPE2) TRAVEL AND USE OF CLEANING AGENTS PRODUCTS Tractor A milk truck collects milk from the farm emissions, e.g. in and refuels with biogas at the same time transporting feed 4 2019* 74,600 84,600 1,792,000 69,900 47,000 3,700 4,600 204,600

CH (ton CO2e) Additionally, nitrous oxide (N2O) 2020 is released from cultivated soil in Methane 91,200 63,900 1,812,400 70,400 46,600 2,000 3,600 195,300 (ton CO2e) the decomposition of plants and is released in cow’s manure and in fertilising digestive process *2019 is the official baseline year for Valio’s emissions reductions. VALIO – SUSTAINABILITY REPORT 2020 Source: Valio 37

personnel travel, and product storage About logical Institute, among others. Additionally, and handling at the grocery store and in we are mapping the amount of organic peat- THE CARBON FOOTPRINT OF MILK, the consumers’ homes. The emissions lands with a higher-than-average climate FROM FIELD TO TABLE inventory has been made using the 93 % load at Valio farms. Modern, emissions- international Greenhouse Gas Protocol. of the climate impact, i.e. reducing practices for cultivating peatlands Read more >>> the carbon footprint, of one are currently under development. carton of milk comes from primary production at farms The share of renewable energy sources in CARBON-NEUTRAL the heat production at Valio’s Finnish sites MILK CHAIN 2035 in 2020 was about half, and purchased electricity produced with guarantee of We will move towards our 2035 goal primarily origin renewable energy was 20%. along three routes: We will bind more carbon dioxide into grassland than we currently do, About 93% of the climate impact, i.e. the we will use manure to produce biogas, which carbon footprint, of one carton of milk is a replacement for fossil fuels in trans- comes from primary production at farms. portation, and we will reduce emissions About half of this is methane (CH4) released from peatlands drained from wetlands. PRIMARY PRODUCTION LOGISTICS AND PACKAGING from the digestive process of animals and Towards the end of the chain, the climate AT FARM FACTORIES manure handling. The rest of it is nitrous oxide impacts are reduced through energy- (N2O, 25–35%) generated in the nitrogen efficiency improvements at plants, an fertilisation of fields, and carbon dioxide increased share of renewable energy, 93 5 2 from liming fields, energy use at farms, and optimised transport routes, eco-friendly % % % fertiliser production (CO2, 15–25%). packaging, and reduced waste in production, at the grocery store, and in 4,5 % Fertiliser production 1,5 % Logistics Raw milk’s carbon footprint currently doesn’t the consumer’s home. Read more >>> take into account the sequestering and 4,5 % Manure handling: 3,5 % Energy use methane and nitrous oxide releasing of carbon between the soil and at factories 6 % Energy use at farm: atmosphere. International guidelines on fuels and electricity calculating carbon balance are under 26 % Feed cultivation: preparation, and the topic is currently being nitrous oxide In calculating the carbon footprint, the different greenhouse studied also at Valio in multiple projects in 49 % Cows rumination: gases are converted to a common format, carbon dioxide collaboration with the Natural Resources methane equivalent (CO2e). The lifecycle calculation model of Valio’s Institute Finland and the Finnish Meteoro- 3 % Other inputs raw milk was certified in 2019 (Carbon Trust). VALIO – SUSTAINABILITY REPORT 2020 39

We want to cut milk’s carbon footprint in Finland to zero by 2035. The target is very ambitious, but it’s achievable through cooperation. The primary means for reducing greenhouse gases are better carbon binding in grasslands, use of manure as biofuel, as fertiliser, and as bedding, and reducing emissions from peatlands drained from wetlands. Also the welfare of the cows and the correct feeding reduce emissions per litre of milk.

ROADMAP TO NET ZERO BY 2035: CASE Since VALIO SET ENVIRONMENTAL TARGETS 1950´s Methane ALIGNING WITH THE PARIS AGREEMENT emissions from By 2035 cows have ”Mitigation of emissions, been cut by circular economy, and carbon half, thanks to 100% sinks in our milk chain will In 2020, Valio set environmental targets based on the Science Based Targets* (SBT) initiative; better health reset our carbon footprint” and welfare, SBT accepted the targets in early 2021. We are committed to limiting the climate emissions of feeding, and Lower emissions by 2030: our production chain to meet the Paris Agreement goal of limiting global warming to an increase higher milk More than 600 Valio farmers have Carbon sinks, eg. production calculated their farm level GHG On milk collection of no more than 1.5 degrees Celsius. ability emissions. The average Carbon grasslands logistics -28% Footprint of the milk received by Valio is between 0,8 - 1,3 CO2e At the dairy farm per litre of milk. This involves significant reductions in emissions throughout Valio’s production chain, from the Since level -50% Manure processing 1970´s into fuels & fertilizers dairy farm to the grocery store: the emissions reduction target at the farm level is 50% (cutting raw Innovative and At production climate friendly Utilization of cow -30% plants -47% milk’s carbon footprint in half), 47% for energy use at the plant level, and 28% at the milk collection packaging manure as nutrients and bioenergy • Methane mitigation logistics level by 2030, compared to the levels in 2019. In the Science Based Targets initiative, technologies New biogas plants • Barn Technology Valio’s climate work is reviewed to 2030. However, Valio’s climate targets extend beyond that: 2018- to produce bioenergy • Less emissions from Low carbon organic soils logistics • More efficient land use and milk -60% • Renewable energy Valio is aiming to cut the carbon footprint of its milk chain to zero by 2035. Modern • Welfare, processing Feeding First carbon cultivation productive cows innovation for farmer course. techniques in methane mitigation *The Science Based Targets initiative provides a tool for companies to plan their climate activities 2018- Now we have organic fields Food waste- 300 active to meet the targets of the Paris Agreement. The aim is for companies to have environmental targets related actions carbon that are based on science and that create significant emission reductions. Science Based Targets with customers farmers. assesses and approves the targets in a science-based, independent manner and consumers Net emissions zero

Read more >>> 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 VALIO – SUSTAINABILITY REPORT 2020 41

WE ARE TRAINING FARMERS VALIO CARBO® ENVIRONMENTAL CALCULATOR: IN CARBON FARMING DAIRY FARMS ARE REDUCING THEIR CARBON FOOTPRINT

REGENERATIVE Farmers can improve carbon sequestration The Valio CARBO® environmental calculator by rotating crops, by increasing grass species we developed for Finnish dairy farms was AGRICULTURE diversity, and by keeping their fields green launched in October 2020. The calculator MEASURES year-round. gives dairy farmers precise information about the climate and environmental impacts of the IN 2020 Together with the Baltic Sea Action Group, farm’s raw milk. The calculation model has we are training dairy farmers in carbon been certified by the Carbon Trust organisation farming. In early 2021, we had provided and is based on the Intergovernmental Panel RESEARCH ON CARBON training to some 300 farms, i.e. about 7 per on Climate Change’s (IPCC) recommendations, BINDING IN FIELDS cent of all Valio farms. We are the main the European Commission’s Product partner in BSAG’s E-College for regenerative Environmental Footprint Category Rules agriculture. The free online course offers (PEFRCR), and Valio’s own scientific work In the Valio headed CARBO® project we are farmers and students information about that started as animal nutrition research working with top research groups and other regenerative agriculture and improving 15 years ago. The technology platform was grass chain expert companies. Participants the soil. The E-College opened in created by the Finnish Biocode. include the Finnish Meteorological Institute, February 2021. the Natural Resources Institute Luke, the We have held weekly trainings for farms since University of Eastern Finland, Yara, known October 2020. More than 80 training events for its fertiliser solutions, and Atria Tuottajat. are planned for 2021. Since the beginning of Research and development projects are 2021, we have trained 1,000 dairy farms; of focusing especially on carbon-binding grass these, more than 600 have reported their and efficient pasture cultivation. Based on own raw milk carbon footprint to Valio. That the research results, we created carbon covers about 25 per cent of the milk received farming recommendations and a method by Valio. When the farm-specific baseline and for which we are seeking independent Gold emissions sources are known, the measures Standard certification. to reduce emissions can be targeted more accurately. Our goal is to decrease farm- level emissions by 30 per cent in five years. VALIO – SUSTAINABILITY REPORT 2020 43

CARBO® SEED MIXES WE ARE TURNING F CLIMATE-SMART FROM HEALTHY CALVES TO IMPROVE CARBON ARM MANURE INTO ENERGY CULTIVATION OF PEATLANDS TO CLIMATE-WISE COWS BINDING OF GRASSLANDS

Manure can be used to make biogas. This The biggest challenge in cutting milk’s Launched in February 2019, Valio CARBO® The aim of the Climate-wise Cow project is to not only brings financial gain to a dairy farm, carbon footprint to zero is related to fields grass seed mix improves carbon binding in improve the health of calves, the longevity of it also reduces the farm’s emissions. Biogas drained of wetlands or peatland forests soil. The mix includes clovers, which help cows, and the milk loss caused by illnesses. production at dairy farms reduces milk’s over decades. These account for about pollinators, as well as grass species that are Dairy farms can use the SimValiokarja carbon footprint and enables emissions 10 per cent of Finland’s arable land, but more resistant to changing weather calculator to simulate the correlation reductions in transportation, if the biogas they produce about half of the agricultural conditions and improve the soil structure. between the health of cows and the renewal is refined into traffic fuel. If both emissions environmental emissions. The drainage, The selection was expanded in October of cattle to the farm’s finances and the reductions are taken into account in milk’s tillage, liming, and fertilising accelerates 2020, and now there are five different CARBO® amount of methane generated per kilo of carbon footprint, the footprint would be the decomposition of peat and releases seed mixtures targeting various needs. milk. Valio also participated in research about 25% smaller. carbon dioxide into the atmosphere. looking at cow mortality. Additionally, we created the Climate-wise calves training To promote biogas production, it’s important Greenhouse gas emissions from peatlands concept and materials for farmers. to understand which areas in Finland have must be significantly reduced if we are to FEED ADDITIVES CAN sufficient amounts of manure, whether achieve our target of a carbon-neutral milk REDUCE METHANE Climate-wise calves workshops were held it’s feasible to produce the biogas at the chain. Valio is actively involved in projects EMISSIONS FROM COWS under the leadership of partner veterinarians, dairy farm or in a bigger biogas plant, and studying peatland climate impacts and cooperatives, and ProAgria advisors. where the biogas will be used. In 2020 we ways to reduce their emissions. In 2020, 24 dairy farms participated in the workshops The Dutch company DSM has developed estimated the annual manure volume of the release of greenhouse gases from the in 2020. New practices to improve the a new additive that can reduce methane all our dairy farms, and we developed peatlands at four Valio dairy farms was welfare of calves were piloted at the farm emissions from cattle by about 30%. Valio a biogas production model. measured in the Climate change mitigation level, and the results of work done at other and DSM started collaboration in 2020 in organic soils on cattle farms (OMAIHKA) farms were also reviewed. Good practices to find opportunities to utilise the new We promoted biogas production in practice project. Grass forms a perennial crop on on raising calves are shared with more than solution at dairy farms as part of the target in Haapavesi. The first manure-powered the surface of peatland, which reduces 1,200 professionals in the Climate-wise to cut the milk chain’s carbon footprint milk truck fills up with biogas at the Vuorenmaa emissions compared to an annual grains. calves Facebook group. to zero. dairy farm when it picks up milk for the We are working with researchers and Haapavesi dairy. Read more >>> farmers to develop climate-smart farming practices for peatlands. VALIO – SUSTAINABILITY REPORT 2020 45

PROMOTING BIODIVERSITY organic milk production, and the grassland Some twenty dairy farms around Finland AT DAIRY FARMS grazing of dairy cattle. Several of Valio’s participated in the observation efforts. climate programme measures, such as In addition, we surveyed valuable natural In 2020 we worked with experts to study CARBO® seed mixtures, secure biodiversity. locations at 30 dairy farms together with milk production’s impacts on biodiversity We communicated to consumers about the landscape experts from the Rural Women’s and examined opportunities for ecological significance of biodiversity in food production Advisory Organisation. The advisory service compensation. Valio’s dairy farmers are in 2020 on the packaging of organic products has received excellent feedback, and a significant land owner group in Finland, and in a video about the biodiversity work magnificent areas of a high natural value and farms have both positive and negative being done at dairy farms. have been discovered at the farms. impacts on nature. In summer 2020 we monitored indicator The best ways to secure biodiversity species in agricultural environments with are related to carbon farming practices, the Finnish Biodiversity Information Facility.

CLIMATE CHANGE HABITAT DAIRY FARM

CARBON SINKS GREENHOUSE CASE DEGRADATION OF HABITATS RESTORATION OF HABITATS Grass fields, GAS EMISSIONS Unilateral crop rotation, use of Establishing and maintaining traditional Cattle-produced PRECOOLING MILK pesticides, erosion, reduction of field grazing areas, traditional biotopes, and methane, manure borders and margin areas, ending of biotopes, and wetlands, forests as handling, cultivation carbon sinks of peatlands SAVES ENERGY IN THE BARN grazing, bush encroachment biodiversity areas and strips

Cattle as caretakers and Efficient and quick cooling of milk to below +4 degrees immediately after BENEFICIAL PRACTICES Spread of clearers of the environment, Grazing, carbon farming, organic, invasive species milking is a crucial part of the milk quality chain. Cooling accounts for diverse crop rotations, manure in grazing areas a large part of the barn’s energy consumption, typically about 20 MWh per litre. biological nitrogen binding BIODIVERSITY ADVERSE PRACTICES Based on our measurements, 50–70 per cent of the milk’s cooling need can be done Use of pesticides, nutrient run-off, clear-cutting with precooling using tap water before the farm’s tank. The water flowing through Pollinators enjoy being in blossoming carbon forests to spread manure the precooling equipment is usually recovered for use as drinking water for the cows. grass, and other insects, like beetles, prefer NUTRIENTS AND Environmentally cattle manure. Birds get nutrients by eating adverse chemicals insects and use dairy farm buildings for CHEMICALS nesting and shelter. Thus the abundance We encourage farms to invest in milk precooling equipment. Valio experts have of species maintains the biodiversity of the farm ecosystem. NUTRIENT actively developed precooling solutions suitable for our farms. RUN-OFF NUTRIENT RECYCLING Manure Manure nutrients for crops, nutrients in enhanced use of manure, e.g. Simplified perspective of the dairy farm. Kaj Nyman, Development Manager, Valio water systems for biogas to replace fossil fuels Source LEAP Biodiversity review, Teillard et al. 2016 and in the air VALIO – SUSTAINABILITY REPORT 2020 47

HOW IS ANIMAL actions to improve animal welfare. About NO ANTIBIOTIC RESIDUES WELFARE MONITORED? 98 per cent of the milk received by Valio in 2020 came from farms receiving a sustain- Production animals in Finland are given ANIMAL WELFARE We can’t ask a cow directly about its ability bonus. Since the beginning of 2021, medication in moderation compared to, experience, but studies show that animal all dairy farms supplying milk to Valio have e.g., southern European countries, welfare is shaped by four areas: committed to meeting Valio’s sustainability and critically important antibiotics for IS CONTINUOUS criteria. The sustainability bonus is two human medicine are not used for 1 good conditions cents per litre of milk. production animals. 2 proper feeding DEVELOPMENT 3 health SUSTAINABILITY BONUS In Finland, cows are not given antibiotics 4 opportunity for species- REQUIREMENTS: as a preventive measure. If a cow is sick, appropriate behaviour a veterinarian will examine it and prescribe WORK • A veterinarian makes a healthcare the appropriate medication. A record of In Finland, Naseva, the Centralised Health visit to the farm at least once a year the medication must also be kept. When Animal welfare is the foundation of Care Register for Finnish Cattle Herds, to assess the animal welfare and we use medicines only for a diagnosed our operations. Valio is a company maintained by Animal Health ETT, is used practices at the farm. The healthcare need, we prevent the increase of antibiotic- to monitor and assess welfare from many plan is recorded in Naseva, the resistant bacteria strains. owned by dairy farmers; taking care of the same starting points as in the inter- Centralised Health Care Register of animals is daily work for them. national Welfare Quality® assessment for Finnish Cattle Herds We verify milk purity by testing for trace protocols. Information about the occurrence antibiotics. If a cow is treated with anti- of infectious diseases, disease protection, • Regular hoof health tracking biotics, its milk is tested clean after a waiting and analyses results are collected in Naseva and treatment period before milking into the farm’s tank. and the use of veterinary pharmaceuticals The milk is tested three times: first at the is monitored. One condition for the Valio • Anaesthetics, pain relief, and s farm, then at the dairy before the milk is sustainability bonus is that the farm is edation during disbudding, i.e. unloaded and, finally, before the milk is included in Naseva. removal of a calf’s horn buds moved to production.

ALL FARMS INCLUDED • New barns must be built as freestall COWS MOVE FREELY IN IN THE SUSTAINABILITY barns, allowing the cows to move FREESTALL BARNS BONUS PROGRAMME about freely In a freestall barn, cows can move about Valio pays a sustainability bonus to the freely year-round and they can eat and rest dairy farms that commit to taking voluntary when they choose to. Milking is done at a VALIO – SUSTAINABILITY REPORT 2020 49

milking station or by an automatic milking system. About 40 per cent of the Valio farms’ HOW IS barns are freestall barns, and more than two ANIMAL WELFARE thirds of the cows live in them. ASSESSED? AIMING FOR MORE GRAZING AND OUTDOOR ACCESS IN WINTER GOOD REARING GOOD FEEDING GOOD HEALTH BEHAVIOR / About 70 per cent of the cows and young ENVIRONMENT CONDITIONS • No prolonged hunger • No injuries • Social behaviour cattle at dairy farms enjoy grassland grazing • No prolonged thirst •No illnesses • Other behaviours during summer and about 18 per cent of • Comfortable resting place •No procedure- • Good human-animal • Comfortable temperature • Feeding and nutrition status induced pain relationship the dairy farms provide year-round outdoor • Ease of movement • Access to water • Positive emotional state access. We advise farms to take into • Sufficient milk drinking for • Overall condition and health consideration grazing and exercise • Clean and dry animals calves and mode of drinking • Udder health • Air quality and temperature • Limping • Behaviour of animal group opportunities whenever planning a new barn . • Total space per animal • Skin and joint damage • Human-animal • Laying down area ADDITIONALLY, • Disbudding relationship • Laying down comfort IN NASEVA • Mortality • Disturbed behaviour • Calving space • Sufficient hoof care • Animal handling and CASE • Slipperiness • Occurrence of handling spaces • Grazing infectious diseases CONDITIONS THAT PROMOTE WELFARE IN THE BARN • Exercise • Disease protection • Hook-up • Study results Our aim is for our dairy farmers to plan and construct new freestall barns and their surroundings • Structures restricting • Use of pharmaceuticals Welfare Quality movement monitored based on current best knowledge, with consideration to animal and people welfare and to Naseva responsible ways of operating. In 2020 we started compiling the recommended specifications of a Valio freestall barn. We factored in the sector’s latest research and product development, as well as implementation of proven good practices.

In addition to welfare and responsible ways of operating, barn design must take into consideration financially sustainable solutions, milk quality, and the Carbon-neutral In Finland, the bovine health register Naseva is used to monitor and assess welfare from the milk 2035 targets. We encourage dairy farmers to use these guidelines when implementing same starting points. Naseva also collects information about the occurrence of infectious diseases, future freestall barns. These also serve as guidance in the development of existing barns. disease protection and research results, and monitors the use of pharmaceuticals. One condition for the Valio sustainability bonus is that the farm is included in Naseva. Kristiina Sarjokari, Herd health veterinarian VALIO – SUSTAINABILITY REPORT 2020 51

KEY FIGURES ON IN SEARCH OF NEW harmful procedure to the animal than if the milk quality drops or a disruption in cleanliness are managed at the farm. COW EXERCISE AND OUTDOOR NEW WEANING METHODS de-horning an adult animal. production occurs. We are also constantly If a shortcoming is found, the dairy farmer ACCESS IN 2020: BARNS ARE developing our collaboration with healthcare receives instructions on remedying the issue. Calves are weaned from their mothers so One of the Valio sustainability bonus and supervisory veterinarians. In the most serious cases, milk collection is • About 40% of the barns are freestall FREESTALL that we can begin milking the cows and a criteria is that if a calf is disbudded, it suspended until the issue is in order. barns. Since freestall barns are usually BARNS safe environment can be ensured for the must be given sedation, an anaesthetic, Our goal is to audit 20% of our farms per bigger than stanchion barns, more than calves. In modern freestall barns, cows and enough pain medication also after year. In 2020 an audit was conducted at MILK QUALITY 2/3 of the cows live in freestall barns. move about freely. That’s why calf safety the procedure. This way, the procedure 13.6 per cent (29.5) of the farms. Because AT ITS BEST among adult cows usually cannot be causes the animal as little stress and of the coronavirus pandemic, there were • Cows or young cattle at some 70% of adequately ensured. pain as possible. fewer in-person meetings and thus fewer In 2020 the share of the best milk (E-rated) the dairy farms graze for at least three audit visits. During a farm visit, a production remained on a good level at 97.1 per cent months and at least six hours per day. In freestall barns, soon-to-be-calving FARM SUPPORT advisor from the cooperative observes how (97.60). Like the previous year, less than Additionally, cattle at some of the cows are moved to calving pens. Calves AND MONITORING well the farm’s milk production process 0.01 per cent of the milk was in the weakest farms move about in exercise yards are often kept in individual pens initially aligns with Valio’s approach: how milk quality rating, 2. Excellent milk quality re- during summer. so that they learn to drink from a nursing Dairy farmers are supported in their work quality, animal welfare, feeding, and general quires continuous monitoring by the dairy bucket. The calves are then moved in with by Valio’s own veterinarian, by some 20 farmer and a quick response to deviations. • At Valio’s organic dairy farms, are big enough, and the laying down area is other calves of the same age. experts that work for the cooperatives, Milk quality is verified before the milking of all animals graze on grass and live cushioned with a stall bed and a sufficient and by a laboratory service that produces every cow. In the daily quality verification in freestall barns. amount of litter. In summer, cows that are We are part of a study looking at alternative data on the quality of the feed and the of the farm tank milk, temperature and housed in stanchion barns are statutorily ways to wean calves at dairy farms, asking milk. The cooperative experts offer free one’s own senses are important tools. • About 18% of the dairy farms required to graze or move about outdoors dairy farmers for their thoughts on weaning consultation and support in issues related Additionally, the dairy farmer monitors the have arranged the opportunity for at least 60 days. About 11 per cent of practices, and reviewing obstacles to why to milk quality, milk processing equipment, milk’s cell and bacterial counts and the for cows to get regular year-round cows in stanchion barns spend time out- weaning is not implemented more. 295 feed production, new investments, and more. milk composition analysis results of every outdoor access. doors also in the winter. Valio dairy farmers responded to the re- milk collection. search survey. The results of the study will Valio and its cooperatives also arrange a FEWER Stanchion barns are gradually disappearing be published in a scientific article in 2021. variety of training courses for dairy farmers At every milk collection visit, milk truck STANCHION BARNS because most of the dairy farms going and dairy farm workers. In addition, Valio drivers inspect the farm tank’s milk out of business – particularly the smaller PAIN RELIEF is involved in research and development temperature, smell, and appearance. In a conventional stanchion barn, each farms – are farms with stanchion barns. FOR DISBUDDING work that aims for better animal health Only milk that meets the requirements cow has its own stall where it eats, drinks, Valio’s requirement that new barns must and welfare. can be pumped into the truck’s tank. and rests; it is also milked there. Feed is be freestall barns is contributing to the Calves are disbudded for safety reasons: The drivers also test the milk for microbial brought to the cow, and drinking water is decreasing number of stanchion barns. caretakers and other animals are safer Sometimes animal care can be jeopardised, traces of pharmaceuticals before it is provided next to the food. With stanchion About 30 per cent of all the milk supplied in freestall barns when the animals don’t e.g. due to a dairy farmer’s illness. An expert delivered to the dairy’s silo. barns, it’s important that the stanchions to Valio is produced in stanchion barns. have horns. Disbudding a calf is a less from the local cooperative will visit a farm VALIO – SUSTAINABILITY REPORT 2020 53

ENERGY EFFICIENCY FUEL AND EMISSIONS We shifted to the use of biopellets as the main fuel at our juice plant. This reduces Our goal, consistent with the Finnish food Dairies need electricity to run equipment and our use of natural gas. We have decreased industry’s energy efficiency agreement for cooling. Heat is needed in drying milk powders, the use of peat by investing in a grate-fired RESOURCE- started in 2017 and ending in 2025, is to in heat-treating fresh products, in washing, boiler and steam accumulator in Seinäjoki. improve energy efficiency in Valio’s own and in facility heating. The quality and volume We aim to reduce the use of peat also at operations by 7.5 per cent from the 2015 of emissions depend on the fuel used. other sites by replacing it with biofuels. EFFICIENT level. So far, the combined impact of the However, the availability of biofuels in energy efficiency actions accounts for • Share of renewable fuels in heat 2020 was challenging, and we didn’t reach about five per cent of our 2015 energy production in Finland 51% (55) our peat reduction target. We monitored consumption, i.e. an annual energy savings • Share of domestic fuels in Finland 84% (83) a test combustion with energy willow in PRODUCTION totalling 35.4 GWh. We will reach our goal, • Wind power accounts for 20% of electricity 2020, and we will continue test PLANTS if we can keep up the same pace. procurement in Finland combustion in 2021.

The most significant environmental impacts ENERGY CONSUMPTION AT VALIO’S PRODUCTION PLANTS, 2020 (MWH/A) FINLAND ESTONIA RUSSIA TOTAL of Valio’s plants are a result of their use of ENERGY-EFFICIENCY ACTIONS IN 2020: Electricity (renewable) 47,389 47,389 energy and water. Our production process Electricity (non-renewable) 193,411 17,773 4,974 216,158 • Improving efficiency of heat recovery networks Electricity (total) 240,801 17,773 4,974 263,548 also generates a wastewater load. We are • Improving heat pump efficiency Heat (renewable) reducing the environmental impacts by • Improving process efficiency with filtering technology Heat (non-renewable) 247,597 24,7597 using best available technology and • Improving heat recovery ventilation efficiency and adjustments Heat (total) 244,592 30,293.2 6,137 281,022 • Installation of LED lighting 492,189 30,293.2 6,137 528,619 through the efficient use of raw Renewable total materials and energy. • Optimising refrigeration compressors’ condensing pressure Non-renewable total 294,986 294,986 All total 718,093 44,768 12,821 775,682

ENERGY CONSUMPTION AT VALIO’S PRODUCTION PLANTS, 2020 (TJ/A) In this section we review FINLAND ESTONIA RUSSIA TOTAL ENERGY CONSUMPTION BY SOURCE IN FINLAND Electricity (renewable) 170.6 170.6 energy efficiency Yksikkö 2016 2017 2018 2019 2020 Electricity (non-renewable) 696.3 64 17.9 778.2 measures and fuel use. Consumption of electric energy GWh 237 225 239 238 243 Electricity (total) 866.9 64 17.9 948.8 Consumption of heat GWh 505 485 499 499 494 Read about water Peat % 37 42 36 27 35 Heat (renewable) 891.3 891.3 Heavy fuel oil % 12 4 0 0 0 Heat (non-renewable) 880.5 109.1 22.1 1,011.7 use, waste, and Light fuel oil % 3 3 6 6 5 Heat (total) 1,771.9 109.1 22.1 1,903 chemicals at the Natural and liquid gas % 13 10 12 10 10 Renewable fuels % 34 40 47 55 48 Renewable total 1,061.9 1,061.9 end of the report. Domestic fuels % 72 81 83 83 83 Non-renewable total 1,576.8 173 40 1,789.9 Consumption of energy altogether GWh 741 710 738 730 737 All total 2,638.8 173 40 2,851.8 Direct and indirect greenhouse gas emissions as well as other significant air emissions are available in the section Environmental information >>> VALIO – SUSTAINABILITY REPORT 2020 55

The collecting of milk from dairy farms in Biogas enabled an EXPORTING A CONTAINER LOAD OF Finland is carried out by roughly 55 contractors PRODUCTS EVERY 20 MINUTES and 75 trucks. On average, the trucks were EFFICIENT on the road for 20.4 hours per day, every 85% Our products are exported from Finland day, in 2020. The average age of the trucks reduction in transport to roughly 60 countries. When we choose is about two years. All trucks meet the latest related greenhouse partners, we verify the EURO emissions gas emissions, LOGISTICS EURO 6 emissions standards. rating of their vehicles. In 2020, about compared to diesel- powered trucks 95 per cent (95) of our export cargo was The size of the trucks is growing. This means shipped as full units. MEANS that more litres can be transported at one time, thus reducing the emissions per litre. In maritime transport, the IMO 2020 restrictions 100% of the trucks engaged in tank transfer took effect in 2020. They require shipping REDUCED traffic between plants and more than 50% companies to use low-sulphur fuel or take of the trucks in milk collection have a other actions to reduce emissions. permissible laden mass of 68-76 tonnes. BIOGAS-POWERED EMISSIONS The environmental load of product MILK COLLECTION distribution is reduced also by sharing We optimise our milk collection and product distribution efforts with other companies. In February 2019, Valio rolled out the first transportation routes, we avoid excess trips, and Annually, we distribute over one third of milk collection truck powered by liquid we fully load trucks. An unbroken refrigeration Finland’s temperature-controlled food biogas, or LBG. Two new LBG-powered chain ensures tasty and safe products. product volume. collection trucks were acquired in 2020. Biogas-powered trucks racked up a total of KEY FIGURES OF LOGISTICS some 650,000 kilometres in 2020. That’s IN FINLAND: approximately three per cent of total milk collection kilometres. Biogas enabled an • Milk’s average trip 85 per cent reduction in transport-related from farm to dairy, 76 km greenhouse gas emissions, compared to diesel-powered trucks. (Source: Gasum). • Milk’s average trip from dairy to grocery store, 88 km February 2021 brought the rollout of the first milk truck running on compressed • Delivery reliability of products biogas (CBG) made from manure. to grocery stores, 99% VALIO – SUSTAINABILITY REPORT 2020 57

Our goal is environmentally smart packaging compared to the previous year. Among that minimises climate impacts and utilises PACKAGING other things, we eliminated all single-use various circular economy solutions. The IS GOOD, plastic spoon lids from packaging. This ENVIRONMENTALLY carbon footprint of Valio’s packaging is reduced the amount of plastic by 44 per about two per cent of the product’s entire WHEN IT’S cent in containers, and the amount of plastic carbon footprint. RECYCLED we use in a year decreased by 170 tonnes. SMART PROPERLY VALIO’S PACKAGING PLANT-BASED PLASTIC PACKAGING COMMITMENTS REPLACING FOSSIL RAW MATERIALS • Product protection: We ensure that In 2020, 24 per cent of Valio’s plastic The most important task of packaging the packaging protects the product packaging was plant-based. 72 per cent is to protect the product and from spoiling and from food waste. (69) of our single-use packaging materials prevent food waste. were plant-based. All of our house-shaped, • Reduce and avoid: We avoid over- i.e. gabled, milk, sour milk, cream, and packaging, and we reduce the amount yoghurt cartons sold in Finland are 100% of plastic and other packaging material. plant-based. We use 250 million of them - VALIO FINLAND SINGLE USE in a year. PACKAGING MATERIALS • Replace: We replace fossil-based 2020 (17.6 MKG) plastics with plant-based solutions. WE ARE INCREASING THE USE OF RECYCLED PLASTIC • Circular economy: We ensure that Metal Liquid 2% packaging the packages are increasingly better Plastics, board The amount of packaging produced from suited for recycling and collection fossil 44% recycled plastic was 250 tonnes in 2020. 26% systems. We increase the use of Plastic We renewed the Valio MiFU® products and recycled plastic. 6.0 Mkg triangular gourmet cheeses packaging: - 8% now the majority of their packaging WE ARE REDUCING Plant-based material is recycled plastic. We also 72% THE USE OF PLASTIC Plastics, renewed the cheese slice packaging: over renewable + 3% 55 per cent of the packaging material is 8% Our goal is to reduce our use of plastic by produced from plastic bottles recycled in Other 20 per cent from the 2019 level by 2025. 3% Finland. By making the packaging thinner, We reduced our plastic use in 2020 by Corrugated we also save 70 tonnes of plastic in a year cardboard a total of 485 tonnes, or eight per cent 17% (-14% per package). VALIO – SUSTAINABILITY REPORT 2020 59

PACKAGING IS GOOD, are worn out or broken end up in plastic PLAIN-LANGUAGE RECYCLING PACKAGING COMMITMENTS WHEN IT’S RECYCLED PROPERLY recycling (about 80,000 kg). LABELS ON PACKAGING

All our packaging is 100% compatible with Export products are packaged in cardboard Pursuant to consumers’ wishes, in 2020 TOWARDS CIRCULAR ECONOMY AND MINIMISING CLIMATE IMPACTS recycling collection systems. In transporting transportation and wholesale packages. Their we added plain-language recycling labels milk, yoghurt, and other products, we use recyclability is compliant with EU guidelines. to our packages to facilitate everyday life. Less Minimising Plant- Suitable recyclable plastic milk crates, dollies, and The recyclability in the target countries The labels will be found on all our packaging 1. 2. plastic and 3. 4. food based for Product Reduce packaging Replace Recycle trays (40.5 million times/year). Units that depends on the local recycling arrangements. sold in Finland, in the upcoming years. waste packaging recycling protection and avoid material

ENVIRONMENTALLY SMART PACKAGING > FOCUS AREAS SUSTAINABLE PACKAGING ACTIONS ALMOST FOR 50 YEARS PLASTIC’S MANY LIVES

MINIMUM % OF RECYCLED PLASTIC

2019: Giving up black plastic, cheese package made of >90% recycled plastic, 90 50 1970’s: Started a system for 2000: Cup made of cardboard 2015: The world’s first Increasing use of plant-based reusable transport packaging and a thinner plastic 100 % plant-based milk packaging material in juices and % % in Finland 2003: Reusable cup trays carton export milks Decking boards . 0 0 5 9 0 1 1 2 0 7 0 0 0 0 9 1 2 2 2 2 8 0 0 1 1 9 0 0 9 2 1 2

1990’s: Co-founder in 2010: All Valio’s packaging 2018: All gable-top milk, Finland’s package recycling collectable for recycling systems. sour milk, cream and Soda bottles and other • Artisan cheeses • MiFU® strips, mince, patties Various programme – these days, all yoghurt cartons made of plastic waste collected • Cheese slice packages recycled plastic of our packaging is recyclable, Gave up the use of PVC, no plant-based material from consumers products even the plastic ones hormone disruptor plastics in use. VALIO – SUSTAINABILITY REPORT 2020 61

With close to 5,000 recipes, Valio.fi is one We want to encourage Valio will double the number of of Finland’s most popular food sites. We Finns to eat healthier its Heart Symbol recipes for also offer recipes for professional kitchens and in line with 2 professional kitchens INNOVATIONS and catering services, as well as nutrition information, calculators, and menus for NUTRITIONAL We want to offer to professional kitchens home cooks, professional chefs, and nutrition RECOMMEN- and catering services more recipes that TO PROMOTE professionals. The calculators can be used DATIONS are aligned with nutritional recommendations. to estimate the intake of iodine, calcium, Our goal is to double the number of Heart and vitamin D, for example. We also offer Symbol recipes targeting professional HEALTH AND nutritional tips through our social media kitchens by 2022. channels. Valio’s everyday recipes as plate WELLBEING There were 132 Heart Symbol products in model pictures encourage more Valio’s retail and professional kitchen port- 3 vegetables in the diet Valio’s product development is based on listening folio in Finland in 2020. A product with the to the consumer, and on products that taste Heart Symbol is a better choice in terms of fat Valio will develop nutritionally We want to encourage Finns to eat healthier content and quality, sugar, and salt, compared recommended, climate-friendly and in line with nutritional recommendations. delicious and have good nutritional value. to the average of the product category. 1 recipes for home cooks We are committed to creating plate model- When Nobel Laureate A.I. Virtanen based pictures of 20 of our everyday food headed the Valio laboratory, the THREE NEW NUTRITION We want to offer consumers nutritionally recipes by 2022, and we will communicate concept of using innovations AGREEMENTS recommended recipes that are easy and on our website how to turn a main course to improve wellbeing became suitable for home cooks and that are also into a well-balanced meal by adding a side our guiding principle. In 2020 we committed to three new nutrition more climate-responsible alternatives. of salad or other vegetables, for example. agreements to support the wellbeing of We use the Heart Symbol meal criteria Finns. The Nutrition Agreement Model of as an indicator of nutritional quality. As the Finnish Government’s Nutrition climate-responsible criteria, we use the Committee encourages food industry more climate-friendly diets introduced in operators to promote high nutritional FoodMinimum, a research project of the quality in diets. Natural Resources Institute Finland and the Finnish Environmental Institute. By 2021 we achieved our goal: we published 10 recipes on Valio.fi that were created on the basis of the criteria mentioned above. VALIO – SUSTAINABILITY REPORT 2020 63 RESPONSIBILITY OBLIGATIONS

2020 VALIO – SUSTAINABILITY REPORT 2020 65

In 2020 we renewed our Code of Conduct. We continued the human rights-related we listened to human rights and responsible It more comprehensively covers the work in 2020. sourcing experts, e.g. NGOs. They provided principles we respect and by which we insight on impacts related to supply chain RESPECT FOR operate. The principles are valid for Valio Based on the assessment, the most employees in particular. Based on these employees in all countries. We also updated significant risks were identified and, if considerations, we sharpened the focus of our Code of Conduct online training. materialised, would be serious, although the assessment. We will continue reviewing HUMAN RIGHTS It contains a wider variety of everyday the probability of them is low. These are: it in collaboration with stakeholders. situations. 82% of those who completed the training noted that human rights are • Shortcomings related to employment Based on the personnel discussions, it was IS AN IMPORTANT not a distant issue, but are an intrinsically and working conditions very clear that occupational safety-related linked to our operations. • Discrimination and harassment processes are very good at Valio, and the • Negative impacts on people employees have plenty of channels to PART OF In 2020 we also renewed the Supplier health and safety make their voices heard. They are also and Distributor Code of Conduct. As • Use of child labour and young workers sufficiently heard. part of the supplier approval process, • Forced labour our suppliers and partners commit to • Restricting freedom of association WE ARE REDUCING RISKS OUR WORK following Valio’s sustainability principles. • Restricting freedom of expression THROUGH PRACTICAL MEASURES • Large-scale use of water in producing Valio is committed to respecting human rights, VALIO HAS IDENTIFIED ITS of agricultural raw materials Based on the human rights impact ethical business operations, and ensuring HUMAN RIGHTS IMPACTS assessment, we improved our due a fair, equal, supportive, safe, and healthy In 2020 we included in the assessment diligence process and reduced our risks workplace for personnel. The Code of We carried out an extensive human rights work the groups impacted by Valio. We through practical measures. The main Conduct (Our way to operate − One Valio) impact assessment in 2019. Read more collected feedback from our own personnel actions taken in 2020 are listed on the guides our work. about the assessment on Valio’s website. and from the cooperatives. Additionally, next page.

Indirectly, e.g. in its procurement and supply chain Directly in our Rights related to working conditions, the freedom of assembly and association, the If these risks own operations freedom of opinion and expression, children’s rights and the ban on forced labour. materialise, Human right to Additionally, we identified risks that may have a wide-ranging impact on Valio can impact health, safe working a number of human rights. These include, e.g., unfair competition, bribery, on the following conditions, as well as corruption, and the environmental impacts of milk production. human rights: non-discrimination Read more about the environmental impacts of milk production >>> and non-harassment Read more about supply chain risks >>> VALIO – SUSTAINABILITY REPORT 2020 67

WE ARE REDUCING RISKS THROUGH PRACTICAL MEASURES Based on the human rights impact assessment, we improved our due diligence process and reduced our risks through practical measures. VALIO HAS IDENTIFIED The main actions taken in 2020 are listed below. ITS HUMAN RIGHTS IMPACTS

Code of Conduct • Human rights policy as part of the Code of Conduct update • Renewal of Code of Conduct online training

Supplier and • Code of Conducts for suppliers and distributors were combined: Distributor Code of more broadly covers supply chain risks, used globally Conduct update

Global food safety • First official, global guidelines were approved and published on Valio’s website requirements for • Strict food safety requirements always apply to our suppliers suppliers published Communities Consumers Control process • We identified raw materials with particularly high amount of risks in terms of their production for high-risk raw • We created a process to outline the utilisation targets for high-risk ingredients, materials approved and we take them into consideration in our product development process and launched • Read more about responsible sourcing >>>

People working in People working in • We recognised that children work with their families at dairy farms without it being milk production procurement and Children actual child labour, i.e. work that violates children’s rights distribution at dairy • We added consideration of the principles of children’s safety at dairy farms farms to the good Valio milk production guidelines

Valio personnel Preliminary • There are multiple higher human rights risks related to foreign labour study on the • We looked at the kinds of risks related to recruiting foreign labour. foreign labour We interviewed a few dairy farmers and their foreign workers recruitment • We identified that human rights risks in the recruitment process in Finland are rather small process at dairy because the hiring of individual people for dairy farms is usually for long-term employment. farms The entry process into Finland is comprehensively under the control of the authorities

Valio’s internal ways of operating and the mutual interaction of Valio employees have a direct Improving • We improved occupational safety and wellbeing in line with our global development programme occupational safety impact on our employees. The outer perimeter shows the people who are indirectly • Read more about occupational safety >>> and wellbeing impacted by Valio’s own operations or its supply chain.

Reducing • We identified several environmental impacts that also impact people environmental • Read more about environmental impacts >>> impacts VALIO – SUSTAINABILITY REPORT 2020 69

WE IMMEDIATELY ADDRESS specify the assessment systematically HUMAN RIGHTS RISKS THAT ASSESSING as the work advances in the different HAVE MATERIALISED HUMAN functions.

We monitor the materialisation of human RIGHTS We always initiate a human rights impacts rights impacts as part of daily work IMPACTS assessment review also in connection (meetings, discussions, etc.) and through is not a one-time task with the following: internal and external reporting channels. Internal findings and incidents (e.g. hazards • New functions/new business and accidents) related to food and occu- DIVERSITY AND SAFETY & pational safety are reported at our Finnish • Significant changes in the external INCLUSION WELLBEING sites to the relevant observation programme. operating environment In other topics, Valio uses a global Whistleblowing channel. • Significant changes in Valio’s Read more about the reporting channel´s own operations activities and handling process >>> • A new operationally relevant impact, Valio receives external concerns related to risk, or perspective that has been human rights and responsibility primarily brought to Valio’s attention through the consumer feedback channel SAFE AND HEALTHY EMPLOYEE or via email; the way the concerns are The operating environment changed PRODUCTS RELATIONSHIP handled depends on the type of report. significantly in 2020 as a result of the corona- In 2021 we will create a new external virus pandemic. It significantly impacted PEOPLE IN reporting channel and a clear process for the wellbeing and livelihoods of people. SUPPLY CHAIN handling reports and corrective measures. Read about the coronavirus impacts on Valio’s business in the CEO’s review and ASSESSING HUMAN RIGHTS IMPACTS the impacts on Valio people as well as on IS NOT A ONE-TIME TASK the supply chain. We monitor human rights work as part of overall social responsibility. Valio’s social responsibility team includes We assess the timeliness of human rights experts in various subjects. impacts and the effectiveness of measures at least every three years by reviewing the existing assessments and the measures implemented. We expand and further VALIO – SUSTAINABILITY REPORT 2020 71

SAFE PRODUCTS Product safety is ensured by the traceability of raw materials and packaging materials and by self- monitoring of production.

Product safety encompasses • We carefully monitor production • A product’s most important the following: processes and finished products. traceability information is the ‘best before’ date. Information about • All our plants have a food safety o Our plants carry out self-monitoring the raw materials and other materials control system in place. based on the HACCP system. can be traced based on this. We use self-monitoring to identify • We continuously develop food and eliminate factors that could Production plants and warehouses are safety control systems jeopardise consumer health approved by authorities and are subject at the Group and plant level. and safety. to regular monitoring by authorities. Valio’s food safety and quality policy • We monitor changes related to food o Raw milk and product safety is is available online. safety globally, and we update the control ensured through sampling. systems based on this information and The sampling and analysis results on the changes in our own operations. are within the scope of internal and external audits. • The ingredients and materials we use are subject to a strict approval process. VALIO – SUSTAINABILITY REPORT 2020 73

CERTIFIED SYSTEMS CERTIFIED AND SELF-MONITORING SYSTEMS AND ENVIRONMENT • ISO 14001 environmental certification at Finnish and Estonian production plants OPERATIONAL • ISO 9001-certified quality system in Valio Finland, Estonia, and Russia SELF-MONITORING QUALITY

Product safety is ensured by raw material and packaging material • FSSC 22000-certifiedfood safety control system at Lapinlahti, Seinäjoki, Joensuu, Haapavesi, Suonenjoki, Turenki, Jyväskylä, Riihimäki, Vantaa, Tikkurila, Äänekoski, Oulu, traceability, certified quality and food safety control systems, FOOD SAFETY and Ershovo (Russia) plants and self-monitoring of production. • BRC-certifiedfood safety control system at the Võru plant (Estonia)

We operate in accordance with the descriptions, procedures, • Production plants and warehouses have self-monitoring plans compliant with HACCP guidelines and instructions recorded in the Valio Fact management system. SELF-MONITORING • They cover the production process, from the receiving of raw and packaging materials to product, The procedures take into account the requirements of laws, PLANS facility and process equipment monitoring, storage, and transportation • Self-monitoring is verified regularly through internal and external audits standards, and customers.

• Lapinlahti–Seinäjoki regional laboratory: ACCREDITED FINAS accredited T169 test lab, accreditation requirement SFS-EN ISO/IEC 17025 LABORATORIES • Helsinki chemistry and microbiology laboratory: FINAS accredited T022 test lab, accreditation requirement SFS-EN ISO/IEC 17025

• Milk and product purity is verified through stricter residue control than is required by law. RESIDUE We check residue content in raw milk and products for harmful substances, CONTROL such as heavy metals, pesticides, dioxins, mould toxins, and radioactivity. • All residue levels in 2020 were significantly below the statutory requirements and safety limits. VALIO – SUSTAINABILITY REPORT 2020 75

The health, safety, and wellbeing of Valio • We arranged IT and remote employees and those working in our supply management trainings for support chain are the foundation of our operations. in the exceptional time PERSONNEL These issues were emphasised in 2020 because of the exceptional conditions • We piloted virtual coaching on WELLBEING caused by the coronavirus pandemic. innovation management The majority of Valio employees work MANAGEMENT IS EMPHASISED in-person at plants and warehouses DURING EXCEPTIONAL TIMES IS THE where hygiene is very strict also in normal circumstances. We created a hybrid strategy Development as a manager and a supervisor for Valio to manage the coronavirus crisis. is a continuous process. During exceptional FOUNDATION Its key elements are anticipating, testing, times, the role of good management is tracing, and isolation. We managed the emphasised. In 2020 we started renewing crisis effectively. That is reflected in the the supervisory learning path. The path good feedback from our personnel about includes learning modules related to, e.g., OF OUR the quickly updated operating guidelines. coaching leadership, performance PEOPLE BRING management, and employment law. Some Valio employees worked remotely, THE STRATEGY TO LIFE In 2021 the entire programme will be OPERATIONS which was a big cultural change and launched in different operating countries. required people to adapt to the change. Valio’s strategy was updated in 2020. We conducted two wellbeing surveys Committed and capable Valio people are We also built an internal coaching network. about remote work. The results indicated our most important competitive advantage. The role of development managers is to that remote work is largely successful. Together we create innovative solutions for support coaching leadership, readiness We responded to the hopes for better our customers. Our corporate culture has for change, and implementation of the ergonomics, for instance, by offering been built around innovativeness throughout strategy targets at Valio starting with to lend out equipment, from work chairs Valio’s history. In 2020 we supported Valio the plant organisations. to wireless headphones, for home offices employees in implementing the strategy in Finland. Additionally, in other countries in the following ways, e.g.: SENSE OF COMMUNITY DURING webinars related to ergonomics, efficient THE EXCEPTIONAL TIME remote work, and relaxation were offered, • We started training on solution sales and walking meetings were arranged. The exceptional time forced us to think • We made recruitments to support about new ways to maintain a sense of the value-added powder business community. For example, in the USA, there VALIO – SUSTAINABILITY REPORT 2020 77

was the adoption of Lunch&Learn sessions to In the upcoming years we will In the upcoming years we will focus on share know-how as well as breaks to reinforce focus on supporting mental supporting mental wellbeing and measures a sense of community by playing games and wellbeing and measures leading leading to the realisation of our “zero work implementing common thematic ideas. to the realisation of our burnout” target. In 2021 we will try the TARGET: offering of brief therapy, for example. Virtual Christmas parties or other virtual events were organised in all Valio countries “ZERO WORK INDIVIDUAL DEVELOPMENT to support a sense of community. We awarded BURNOUT” THROUGH JOB ROTATION teams in four categories: Valio employees voted for the recipient of the One Valio Award, Learning at Valio happens especially through and the Valio Executive Board selected work-based learning. Additionally, we arrange the recipients of the Innovation Award, the training and coaching. In 2020, there was Added Value Award, and the Leadership less in-person coaching than planned. We Award. The award recipients included held virtual coaching on supervisory work individuals, projects, and teams. and project management. Additionally, Lean Six Sigma training events and projects In spring 2021 we are deploying the new were carried out in production. We also Valio Voice employee survey. The tool to offered several virtual coaching sessions. measure the employee experience is more comprehensive, more interactive, and We invested in individual development by more agile than before. offering new opportunities for job rotation or through participation in projects. A large MENTAL WELLBEING number of the open job positions were A FUTURE FOCUS AREA filled through internal job rotation. There was also internal job rotation in managerial During the exceptional time we offered positions, and there were changes in personnel and supervisors support for mental several managing director positions in the wellbeing. For example, we offered digital subsidiaries, which offered opportunities coaching on wellbeing, low-barrier services for career rotation. with an occupational psychologist, and supervisor training on team support. In Estonia, In 2021 there will be a focus on critical for example, new services, including physical training from the perspective of the therapy and psychological counselling, renewed strategy; the training will be were added to work wellbeing offering. implemented virtually. VALIO – SUSTAINABILITY REPORT 2020 79

Equality and non-discrimination are our we act in such a way that job vacancies key values and part of Valio’s Code of ALL EMPLOYEES attract applications from all genders. Conduct principles. We promote equality ARE EQUAL During the employment relationship, we EQUALITY and non-discrimination purposefully and AT VALIO, AND pay attention to work arrangements and systematically in all our operations. The WE DO NOT thus aim to facilitate the smooth functioning measures are included in Valio’s Equality of work life and private life. Additionally, we DISCRIMINATE AT WORK and Non-Discrimination Plan, which has promote equal working conditions for all been compiled in collaboration with AGAINST genders, especially regarding levels of pay. personnel representatives. All Valio ANYONE BASED AND EQUAL employees complete Valio’s Code of 56 per cent of the employees are male Conduct training, where these issues ON THEIR and 44 per cent female. At the end of are reviewed. Additionally, Valio USA also AGE the year, Valio’s Executive Board had arranges annual virtual training on six members, three of them were female. OPPORTUNITIES GENDER anti-harassment. See more personnel key figures in the ETHNIC ORIGIN Personnel information section. We immediately address inappropriate behaviour and discrimination. Valio NATIONALITY uses a Whistleblowing channel through LANGUAGE which our employees can report their observations. RELIGION Read more about the channel CONVICTION on Valio’s website >>> OPINIONS We promote the equitable recruitment of POLITICAL ACTIVITIES all genders in the various jobs, and we want to create equal opportunities for them for TRADE UNION ACTIVITIES career advancement and job rotation. FAMILY RELATIONSHIPS We develop working conditions to ensure they are suitable for all genders. It is HEALTH important in the recruitment phase that DISABILITY SEXUAL ORIENTATION or other characteristic related to their person. VALIO – SUSTAINABILITY REPORT 2020 81

We log and investigate all Valio occupational 59% of the occupational accidents accidents globally. In Finland, accidents XX resulted in absences of three days or less. occurring during travel between home AIMING FOR and the workplace are also counted as In 2020 we started a project aiming to occupational accidents. All employees significantly reduce the number of in Finland can track accident reports. STOPTake five for accidents in the upcoming years. The ZERO safety safety theme in 2021 is Think for a moment OCCUPATIONAL ACCIDENTS – about safety. We want employees to stop ARE MOST OFTEN CAUSED Stop for a moment and think about the hazards Descripe the task, INCIDENTS & WHILE MOVING ABOUT what am I about to do? related to the work, and how they can AND ARE MINOR be prevented. We are also building our Identify What are the dangers of work? procedures to meet ISO 45001 require- What can go wrong? ACCIDENTS Globally, there were five per cent more ments on occupational health and safety occupational accidents in 2020 than the Assess systems. Our 2021 priorities also include What damage or injury can occur? We do persistent work to improve work safety. previous year. Occupational accidents Evaluate the risks. sharpening our safety management Our goal is to eliminate or minimise personnel, at Valio are mostly very minor and causing model globally. only short absences. The accident Control operational, and property hazards. The planning, How can it be done safely? frequency was 17 accidents per million Who am I to inform? Development of occupational safety implementation, and operation of safe practices hours worked. 27 per cent of the acci- indicators is in the Graphs section >>> required by the coronavirus pandemic were Proceed dents in Finland happened during work Do the job safely! at the centre of everything. commutes. Work commute accidents increased by 27 per cent. There was one report of occupational disease in Finland. There were no workplace accidents resulting in death.

The most common occupational accidents in Finland involved falls or slipping (25% of the cases), a sudden load on the individual (22%), and cuts and injuries caused by a rough object (19%). VALIO – SUSTAINABILITY REPORT 2020 83

Together with the product categories, the approval and management process. sourcing team, product development, the WE UPDATED Our suppliers must commit to Valio’s food safety team, and packaging development, OUR SUPPLIER Supplier and Distributor Code of TRANSPARENT we verify the quality, safety, and origin of Conduct. Additionally, the suppliers the raw materials, as well as the regulatory MANAGEMENT who supply food- or food safety-related compliance of packaging. We require our PROCESS products or services to Valio must commit SUPPLY CHAIN suppliers and subcontractors to also IN 2020 to compliance with the requirements and commit to our responsible way of operating. guidelines related to them. The most important areas of responsible sourcing are food

safety, supply chain transparency, social responsibility, Milk accounts for about 95 per cent of the We updated our supplier management and environmental responsibility. raw material kilos used in the products we process in 2020. It is now based on the risk make. Finnish milk is used in all products classification of the suppliers’ food safety sold in Finland. In 2020, as in the previous and responsibility. From now on, suppliers year, the domestic share of our procure- must meet the requirements in product ments in Finland (including raw milk) was and supplier surveys defined for their own over 90 per cent. supplier category.

The share of Finnish milk in the raw materials You can read about milk sourcing in the Sedex (Supplier Ethical Data Exchange) of our products globally is about 82%. About section Owned by Finnish dairy farmers is a non-profit organisation that helps its 10 per cent of the milk is sourced from as well as Animal welfare. members to promote responsible supply partnered producers in Estonia and Russia, chains. Valio is a member of Sedex AB, and and that milk is used in local production. We ONLY APPROVED we encourage particularly our raw material constantly monitor milk quality. Around eight SUPPLIERS producers in risk countries to become per cent of the milk is sourced from other members of the Sedex organisation. We suppliers: in the USA, e.g., we sell locally pro- To improve the traceability and transparency use the Sedex risk assessment tools to duced cheeses alongside cheeses that are of our supply chain, we aim to know our monitor the results of the responsibility made in Finland. In contract manufacturer suppliers and manufacturers better. We assessments and audits of our suppliers. products, we always aim for raw materials are continuously improving our supplier AB membership means that we use Sedex and end products of a high quality. approval, assessment, and monitoring to assess suppliers and to disseminate processes. Our sourcing policy and information to customers. Among our other raw ingredients are principles guide our activities. berries, grains, sugar, and rapeseed oil. Less than 0.1 per cent of our raw materials In this section we address the sourcing We ensure the food safety and responsibility are from countries that Amfori BSCI has of non-milk ingredients in particular. of the supply chain through a supplier classified as risk countries. We want to ensure VALIO – SUSTAINABILITY REPORT 2020 85

the responsibility of also these products. raw materials are mainly agricultural plant holds and there isn’t enough for use as

We audit our suppliers on the basis of risk products or animal-based raw materials. an industrial raw material. CASE assessments. Our own audits are focused In 2020 we decided that next we will create on ensuring food safety and quality. policies on the use of palm oil, cacao, and We buy tropical fruit mashes, pieces, and RESPONSIBILITY Additionally, we utilise globally recognised soy. Read more about our policies on concentrates from, e.g., South America IS A MUTUAL COMMITMENT responsibility audits (Smeta, BSCI). Valio’s website. and Asia, orange concentrates from Brazil TO OPERATIONAL DEVELOPMENT and Mexico, and pineapple concentrates RESPONSIBLY PRODUCED RAPESEED OIL AND from Indonesia and Thailand. The reliability and good reputation of the supplier is emphasised RAW MATERIALS SUGAR FROM FINLAND in the sourcing of services or materials. RESPONSIBLE SERVICES There are always responsibility risks related The rapeseed oil we use in Finland is one AND MATERIALS In the sourcing of clothing, protective equipment, and footwear intended to the production of raw materials because hundred per cent of domestic origin. The to protect our employees, food safety, occupational safety, comfort, the risks may impact the surrounding sugar has the Hyvää Suomesta [Produced The sourcing of materials and services and product lifecycle are important. Our employees participate in testing environment and people. We have identified in Finland] label, i.e. it’s at least 75 per cent that support production and operations, and choosing the products to be used. the responsibility risks of our supply chain of domestic origin. i.e. indirect sourcing, accounts for a big as part of the human rights impact part of our procurements. We have Puhdaspalvelu Fi Oy is responsible for workwear procurement, washing, assessment and the supply chain risk FINLAND’S LARGEST identified the main areas of development and logistics. We procure protective equipment from Etra Oy. Together we assessment. The most serious risks target BERRY PROCESSOR in indirect sourcing. assess the products suitable for Valio, and Etra is responsible for their automatic countries where the protection of human shelving. This reduces the number of kilometres driven and minimises the rights is inadequate and the labour force Berries and fruits are key raw materials in We have thousands of suppliers, so number of site visits. At the same time, we facilitate our everyday life. largely consists of migrant workers. our products, so they are an important cooperation with key suppliers is critical. Violations related to working conditions category for us in terms of sourcing. For Along with supply chain efficiency and As a general rule, footwear for our plant employees is sourced from Sievin are globally one of the most serious human example, our yoghurts and quarks are competitiveness, we emphasise responsi- Jalkine Oy, which sews and manufactures footwear in Finland. We have rights impacts related to agricultural products. flavoured with jams from the Suonenjoki bility already in the tendering phase. collaborated on the design of the footwear so that it’s functional for our jam plant. The Pitäjänmäki juice plant This allows us to have a real discussion conditions and requirements. We utilise Etra’s logistics in footwear logistics. We strive to manage supply chain responsi- makes berry sauces and juices. and develop operations collaboratively. bility risks through supplier management We value responsible suppliers who stand behind the quality and origin of processes. However, it doesn’t always We favour Finnish berries, based on their RESPONSIBLE PRODUCTS the products and develop their own environmental responsibility. Developing extend deep enough into the supply quality, availability, and price. To ensure FOR PROFESSIONAL KITCHENS the different areas of sustainability involves long-term cooperation. chain. Therefore, based on supply chain availability, we also buy berries, berry AND THE FOOD INDUSTRY responsibility risks, we have identified the mashes, and concentrates from elsewhere Jussi Koskinen, Head of Indirect Sourcing, Valio raw materials requiring special attention, in Europe. We use a lot of Finnish blue- Valio Food Solutions serves professional as their production involves a particularly berries, but Finnish strawberries, e.g., kitchens and the food industry. We make high number of globally known risks. These are sold almost entirely directly to house- the dairy products and the juice and berry VALIO – SUSTAINABILITY REPORT 2020 87 products in-house. We purchase other Despite the challenges, WORK TO ADVANCE VALIO’S products, such as frozen foods, from our we were able to meet RESPONSIBLE SOURCING approved sub-suppliers. The beef, pork, customers’ demands and CONTINUES PRODUCTION to keep our supply chain in chicken, and lamb used in Valio-branded PLANTS operation and responsible products are 100 per cent Finnish. All our We are currently renewing the responsible products containing fish help customers DURING sourcing programme and its measures and Valio has plants in Finland, to make responsible fish choices: we use indicators. The aim is that our operations Estonia, and Russia Finnish or MSC- or ASC-certified fish that CORONAVIRUS will be more sustainable in terms of FINLAND is sustainably caught or raised in accor- PANDEMIC environmental, economic, and social We export products from Finland to roughly 60 dance with the green-lighted fish in the responsibility, and we are able to monitor countries. The majority of exports are milk and WWF’s sustainable seafood guide. our development and respond to customer whey powders as a raw material for the food and expectations even better. baby food industries, as well as butter. OULU PANDEMIC’S IMPACTS ON THE SUPPLY CHAIN We will continue assessing the human CHEESES rights impacts of the supply chain and HAAPAVESI The operating environment changed extend it as part of the strategy work of POWDERS significantly in 2020 as a result of the procurement categories. We will develop LAPINLAHTI coronavirus pandemic, and we restricted among others, caused concern because of our competence in identifying risks in our FRESH PRODUCTS SEINÄJOKI physical encounters to only the essential. the possible shortage of berry-pickers. In supply chain and deepen our cooperation SUONENJOKI JOENSUU packaging procurements, we shifted from with our suppliers to mitigate risks. JAMS ÄÄNEKOSKI We intensified the monitoring of deliveries large packaging to small, as sales dipped in JYVÄSKYLÄ to ensure delivery reliability. The production the professional kitchens sector. In supplier cooperation and in tendering JUICES plants prepared to increase the inventory and agreements, we strive to recognise levels of critical raw materials and packaging We were not able to audit our suppliers as Valio’s target of a carbon-neutral milk BUTTER AND SPREADS materials, and spare parts were ordered planned. However, we learned new ways chain by 2035, and we guide our suppliers TURENKI RIIHIMÄKI RUSSIA proactively. of operating and conducted some remote to support us in our target. We work with VANTAA audits. In the future, we can enhance the our most important suppliers and partners HELSINKI There were challenges in the availability audits and use at least some parts of the for solutions to reduce the carbon foot- of personal protective equipment and hybrid model. print and minimise climate impacts. BALTIC SEA ERSHOVO hygiene supplies because of the rapid ESTONIA growth in demand. Despite the challenges, we were able to meet customers’ demands and to keep our LAEVA

There were sporadic delivery delays in supply chain in operation and responsible. VÕRU raw materials. The availability of berries, VALIO – SUSTAINABILITY REPORT 2020 89

Risk management is a part of normal brand are also linked to the consequences. operations. The work also includes the operational management. Proactive Climate change is a significant external risk. reviewing of risk assessments and various risk assessment helps us to prevent Valio has responded by investing strongly in verification rounds. RISK the realisation of risks and to see the target of carbon-neutral milk by 2035 opportunities more clearly. and by bringing more plant-based products Accident risks are identified and assessed to its portfolio. regularly and their economic impacts are MANAGEMENT As an international food sector player, considered in Valio’s insurance solutions. Valio’s business is impacted by the Since 2020, the global coronavirus The Risk Management Office governs Valio The aim of risk management is to identify operating environment and the milk pandemic has been the primary realised Ltd’s non-life insurance policies and the significant events and uncertainties that market situation both globally and in risk, and we have had a sharp focus on insurance programmes covering the entire can affect the achievement of Valio’s home markets. As a significant receiver managing that risk. At the start of the Group. It also guides insurance activities in strategic, operational, and financial of milk and a manufacturer and distributer crisis, a crisis management model was subsidiaries. Insurance policies are hedges targets, and the occurrence of of food products, the continuity of business implemented to ensure service level against risks of damage that significantly accident events. operations, processes, and information and the health of employees. impact Valio Group’s ability to operate. systems are of key importance to Valio. Insurance coverage and adequacy of The goal is to ensure the high delivery Each function is responsible for risk insurance amounts are assessed, e.g., in reliability to customers every day. As a management of its own operating area. conjunction with the risk mapping of sites security of supply-critical company, The three focus levels of risk identification and from a Valio-level perspective. Focus Valio’s operational continuity also has are legislative and regulatory risks areas in recent years have been cyber a societal dimension – both in securing (“compliance”), operational and project threats and business continuity. the food supply for the everyday life of risks, and peak business risks. In 2020 Finns and also in exceptional situations. Valio started a Group-wide ERM process Continuity management is carried out that identified 160 risks, 13 of them from the dairy farm to the customer. designated as peak risks. Owners have been appointed for the identified risks and The target set for safety is zero incidents control mechanisms have been defined. and accidents. Risk management is particularly centred on also food safety The Risk Management Office supports the and quality. If these fail, there is a risk of risk management work of the organisations personal injury caused by the products by, e.g., developing risk identification and and potential liability risks for consumers analysis procedures and by participating as well as for Valio’s customer companies. in risk identification work. The main focus Reputational risks damaging the Valio is on the development of preventative VALIO – SUSTAINABILITY REPORT 2020 91

GOVERNANCE AND REMUNERATION THE VALIO ADMINISTRATION MODEL

VALIO CO-OPERATIVES Finnish milk producers own Valio SUPERVISORY BOARD • Chairman EUR 3,820/month through cooperatives. We pay out REMUNERATION • Vice Chairman EUR 2,720/month Representative bodies VALIO LTD OTHER OWNERS (elected) all of our operational profit to the • Members EUR 2,220/month Shareholders with milk producers. Valio Ltd’s decision- In 2020, Valio’s Supervisory Board was • Meeting fee for each Board of Supervisory boards no business relationship making bodies are the Annual paid a total of EUR 135,936 in monthly Directors meeting EUR 330 General Meeting, the Supervisory and meeting fees. • Compensation for lost working time Directors Board, and the Board of Directors. for each Board meeting EUR 250 • Chairman EUR 2,870/month Shareholder’s meeting You can read more about Valio’s • Vice Chairman EUR 1,770/month UPPER MANAGEMENT governance model on our website >>> • Meeting fee for each Supervisory REMUNERATION Supervisory Board Board meeting EUR 330 Board of Directors The Board of Directors decides on the • Compensation for lost working In addition to a fixed monthly salary and fringe remuneration, including bonus systems, time for each Supervisory Board benefits like a car and phone, Valio’s upper CEO for the CEO and the Executive Board. meeting EUR 250 management has profit-sharing targets and Remuneration for the Board of Directors retirement benefits. Valio Group’s Executive Valio Organisation is decided on by the Supervisory Board. BOARD OF DIRECTORS Board in 2020 included five members and Supervisory Board remuneration is the REMUNERATION the CEO. Members of the Executive Board purview of the General Meeting. were paid salaries and bonuses as follows: In 2020, Valio’s Board of Directors was VALIO GROUP EXECUTIVE BOARD IN 2020 paid a total of EUR 191,320 in monthly • Total salaries and bonuses and meeting fees. EUR 2,368,000 Annikka Hurme, Chief Executive Officer Teresa Laimio, Executive Vice President, Sustainability and Stakeholder relations Juha Penttilä, Executive Vice President, Operations Tuomas Salusjärvi, Executive Vice President, Growth businesses and R&D Elli Siltala, Executive Vice President, Core businesses and Brand Jyri Virrantuomi, Executive Vice President, Finance and Strategy Marianne Tammela, Chief Human Resources Officer (also included in Executive Board meetings as of 1.9.2020 and officially an Executive Board member as of 1.1.2021) VALIO – SUSTAINABILITY REPORT 2020 93 EMISSIONS TO AIR

More information is available in the section Resource efficiency at production plants. Read more >>>

MAIN GREENHOUSE GAS EMISSIONS IN FINLAND MAIN GREENHOUSE GAS EMISSISONS ENVIRONMENTAL Unit VALIO FINLAND IN ESTONIA AND RUSSIA Heat plants (Valio is the only customer) VALIO ESTONIA VALIO RUSSIA

Fossil tn CO2 eq 90,600 Scope 1 tn CO2 eq tn CO2 eq Renewable* tn CO eq 69,700 INFORMATION 2 Heat plants, fossil 8,400 1,400 Refrigerant leaks tn CO2 eq 600 Heat plants, renewable 1,100 The calculation practices for environmental indicators vary Scope 1 fossil, total tn CO eq 91,200 2 Scope 2 tn CO2 eq tn CO2 eq in Valio’s plants in Finland, Russia, and Estonia due to, for *We comply with the calculation guidelines of the international GHG Protocol.Renewable energy’s Electricity ** 1) Market based 13,500 n/a direct emissions are not calculated as emissions in the inventory, i.e. computationally, they are zero. example, local authority guidance. In this section, we present Electricity ** 2) Location based 6,100 n/a the environmental information for 2020 to the extent that we Heat plants (Valio and other customers) + district heating Fossil tn CO eq 15,700 have the information available in a comparable format. 2 *We comply with the calculation guidelines of the international Renewable* tn CO eq 39,500 2 GHG Protocol (www.ghgprotocol.org). Renewable energy’s

Emissions, market based** tn CO2 eq 48,200 Direct emissions are not calculated as emissions in the inventory, i.e. computationally, they are zero. Emissions, location based** tn CO2 eq 34,000 Scope 2 fossil, total tn CO eq 63,900 2 **Purchased electricity emissions are reported both a market- and location-basis. In combined emissions Raw milk*** tn CO eq 1,812,400 2 we use the market-based figure Other product raw materials, tn CO eq 70,400 packaging, and cleaning agents 2 ***The raw milk greenhouse gas emissions calculation for 2020 is based on detailed carbon footprint calculations of 600 dairy Logistics tn CO2 eq 46,600 farms. It corresponds to about 25% of the received milk. Waste tn CO eq 2,000 2 The figure will become more accurate as the carbon footprint

Work commute and business travel tn CO2 eq 3,600 of more and more farms is calculated. Calculations are done Investments, energy production, using Valio CARBO® farm calculator. It is based on certificated tn CO eq 195,300 and use of products 2 life-cycle calculation model (cert. Carbon Trust 2019).

Scope 3 fossil, total tn CO2 eq 2,130,400

NITROGEN OXIDES (NOX), SULFUR OXIDES (SOX), AND OTHER SIGNIFICANT AIR EMISSIONS, 2020 Unit VALIO FINLAND ESTONIA LAEVA ESTONIA VÕRU VALIO RUSSIA TOTAL

Nitrogen oxides tn 257 8 9 n/a 274 Sulfur oxides tn 126 26 21 n/a 173 Particles tn 6 3 6 n/a 15 Powder dryer, dust emissions tn 14 0 14 VALIO – SUSTAINABILITY REPORT 2020 95

NOISE

Significant noise sources at the plants have been indentified and outfitted with noise reduction equipment, when needed, in order to meet the requirements of the sites’ environmental permits. If there are targets in the immediate vicinity of the plant that could be disturbed, such as residential areas, the plant’s noise situation is reviewed regularly. Valio’s investment systematics includes the assessment of the investment’s noise impacts, and, if necessary, noise impacts are assessed and controlled by creating modelling to support the design.

Our powder dryer is equipped with dust separation equipment that meets the requirements of the EU’s best available technology; the equipment performance is monitored regularly in accordance with the terms of the environmental permit.

WATER CONSUMPTION WASTEWATER A dairy uses a lot of water for cooling and for washing to ensure hygiene. Surface water is used for cooling at certain plants, and that water is returned to the water system after passing through a heat exchanger. The majority of the plants get their domestic water from municipal water utilities. All Valio sites in Finland are connected to municipal sewer networks and their wastewater is routed to municipal wastewater

processing plants. The sites in Estonia have their own wastewater treatment plants, and our Russian plant pre-processes its Milk production also consumes a lot of fresh water. Finland has abundant fresh water resources. wastewater before releasing it to the municipal treatment plant. We aim to reduce wastewater volumes by reusing water We reduce our water consumption at the plants by using a clean-in-place system for process equipment and by enhancing at sites where the use of recycled water does not add to the food safety risk. the efficiency of water use. Today the use of recycled water is significant. In smaller towns in particular, Valio’s wastewater load on a treatment plant is significant in proportion to the town’s total load. We monitor our wastewater load and volume by comparing them to the milk volume received. In 2018-2020, we aimed to reduce our Our large water consumption and the load of product traces in wastewater, if uncontrolled, make the wastewater of dairies wastewater load by 0.5% and its volume by 1.2%. Our target for 2021 is to limit the increase of water consumption to 0.5 per cent and to a significant environmental risk; we have detailed, continuous processes to control it. decrease the wastewater load to 1.0 per cent. Compared to the previous year, the amount of wastewater increased clearly and the wastewater load remained on In 2020 the most significant single investments impacting environmental impact management were the upgrade to the plant area’s the previous year’s level. The increase in the wastewater volume is related to the launch of new operations. wastewater sewer system in Äänekoski and the development of the wastewater treatment plant operations in Võru.

VALIO VALIO VALIO VALIO VALIO VALIO WATER USE IN VALIO’S VALIO VALIO VALIO VALIO Unit ESTONIA ESTONIA ESTONIA Total WATER DISCHARGE, 2020 Unit ESTONIA ESTONIA ESTONIA Total FINLAND RUSSIA FINLAND RUSSIA PRODUCTION PLANTS 2020 LAEVA VÕRU TOTAL LAEVA VÕRU TOTAL

Waste water to the municipal Fresh water withdrawal by source 3 waste water treatment m 5,349,775 5,349,775 Municipal waterworks m3 4,358,419 4,358,419 Waste water to the own 3 m3 249,180 381,208 630,388 630,388 Ground water (own wells) m 395,684 266,679 287,954 554,633 57,637 1,007,954 waste water treatment 3 Surface water (own treatment) m 106,974 106,974 Waste water to own pretreatment and m3 57,637 57,637 Cooling water from water bodies m3 3,333,578 3,333,578 then to the municipal WWTP Water recycled and reused m3 1,311,644 n/a 65,334 65,334 1,376,978 Cooling water to water bodies m3 3,333,578 3,333,578 VALIO – SUSTAINABILITY REPORT 2020 97

MATERIAL EFFICIENCY AND WASTE MANAGEMENT

Our goal is to use raw materials and consumables resource-efficiently. The waste management goal is, in line with local opportunities, to implement the principle of priority, i.e. to direct as much material as possible for reuse and material recycling. Site-specific sorting instructions govern the waste management practices for the ordinary and hazardous waste at the sites. The waste management of the sites in Finland and Estonia are also monitored by environmental authorities.

In Finland and Estonia, by-products from production, faulty batches of products as well as products that are returned from grocery stores are processed in accordance with the by-products regulation of the European Parliament and of the Council. The primary usage is fodder, and the secondary usage is biogas production.

Companies that package products in Finland, and that have a turnover of at least one million euros, have a statutory obligation to arrange and pay for the collection and recycling of their packaging waste. In its agreement with Rinki Oy, Valio has transferred its producer responsibilities for packaging to various material type-specific producer organisations. We participate as a partner in plastics and cardboard producer organisations.

VALIO VALIO VALIO MATERIALS USED IN VALIO’S OWN VALIO VALIO Unit ESTONIA ESTONIA ESTONIA Total FINLAND RUSSIA PRODUCTION PLANTS, 2020 LAEVA VÕRU TOTAL

Raw milk tn 1,807,400 117,142 103,216 220,358 0 2,027,758 Fruits and fruit preparations tn 11,300 1,986.716 0 1,986.716 13,287 Other raw materials (sugars, salts, vegetable oils, etc) tn 23,684 198.787 404.7 603.487 24,288 Use of packaging materials in Finland and for exports tn 28,005 2,946.28 415.00 3 361 31,366

VALIO VALIO VALIO WASTE BY TYPE AND DISPOSAL VALIO VALIO Unit ESTONIA ESTONIA ESTONIA Total USE OF CHEMICALS FINLAND RUSSIA METHOD 2020 LAEVA VÕRU TOTAL We use chemicals in the washing of pipe systems and equipment as well as in whey refining processes. Hazardous waste tn 123 2.667 10 13 135 The environmental impacts from the acids and bases used in washing and powder plant production are related to wastewater. Re-use & Recycling tn 1 893 384.518 116 501 2,394 (plastic, metal, glass, paper etc.) In a normal situation, the acids and bases neutralise each other in a natural process, or the wastewater is neutralised before Waste to energy tn 1 326 0 132 132 1,458 the cleaning process. Wastewater that, exceptionally, is too acidic or alkaline may disrupt the wastewater treatment plant’s operation. Composting and biogas tn 28,807 7,127.3 2,071 9,199 38,005 Ammonia is used as a coolant in the cold plants at Valio’s production plants. Ammonia is toxic to humans and hazardous Waste to burn tn 329 40 132 172 501 to aquatic life, but is commonly used in large cold plants. We have rigorous processes to ensure the safety of our cold plants. Waste to landfill tn 37 21 145 166 388 591 VALIO – SUSTAINABILITY REPORT 2020 99

PERSONNEL PERSONNEL EMPLOYEES BY COUNTRY, 31 DEC 2020 INFORMATION Finland 3,158 Russia 416 The Baltics 487 Sweden 59 USA 30 China 20 Total 4,170

PERSONNEL BY SITE IN FINLAND 31 DEC 2020, INCLUDES PART-TIME AND FIXED-TERM EMPLOYEES Helsinki* 631 Riihimäki** 414 Seinäjoki 397 Oulu 256 Jyväskylä 300 Lapinlahti 286 Joensuu 192 Vantaa Vaarala 205 Haapavesi 125 Turenki 129 Suonenjoki 91 Äänekoski 79 Tampere 22 Muut 31 Yhteensä 3,158

* Figure includes all Helsinki sites ** Figure includes all Riihimäki sites (R1+R2) VALIO – SUSTAINABILITY REPORT 2020 101

SICK-LEAVES AND COST OF OCCUPATIONAL HEALTH SERVICES IN FINLAND

500 6.0%

5.0% 400

4,3% 4.0% 4,0% 4,0% 3,8% 3,9% 300 ACCIDENT FREQUENCY AT VALIO PRODUCTION PLANTS, FINLAND EMPLOYEES Figures cover Valio Oy’s accidents in Finland in 2016-2019. Starting in 2020, we report accidents globally. BY CONTRACT TYPE, 2020 3.0% EUR/employee Sick-leave rate rate Sick-leave 40 Workers’ Compensation Centre’s Tikku statistics app** 36.8 34.4 33.9 Valio Finland* 200 30.7 Valio Global 30 2.0% Includes at-work accidents involving Valio’s employees that result in an absence from work 25,6 Permanent 90% 23,2 or in treatment expenses. Does not include Fixed term 10% 20 22,2 20,5 20.5 professional diseases or commuting. 100 17,0 The statistics are compiled in accordance 1.0% 10 with the recommendations of the Workers’

per million working hours working hours million per Compensation Centre (lost-time injury, LTI). Source 0 * Valio’s Mutual Insurance Company 0 0.0% 2016 2017 2018 2019 2020 ** Workers' compensation center, statistics application Tikku 2016 2017 2018 2019 2020 EMPLOYEES PERSONNEL BY AGE, % BY GENDER, 2020

under 20 y 1.0 20–29 y 17.0 30–39 y 29.0 Female 47% 40–49 y 28.0 Male 53% 50–59 y 23.0 over 60 y 9.0 Total 100 VALIO – SUSTAINABILITY REPORT 2020 103

ECONOMIC INFORMATION ECONOMIC VALIO GROUP NET SALES BY AREA 2020 (%) VALIO GROUP NET SALES BY PRODUCT GROUP 2020 (%)

INFORMATION Finland 58.8 Fresh dairy products 40.1 Russia and CIS 5.5 Butter and spreads 15.4 EU 22.7 Cheese 27.3 USA 4.3 Milk powders 12.8 Asia 8.0 Other 4.4 Other 0.7

DISTRIBUTION OF EXPENSES IN VALIO GROUP 2020 (%)

DISTRIBUTION OF EXPENSES IN VALIO GROUP 2020

CASH FLOW, MEUR 2020 % OF NET SALES Maidontuottajat 41,3 Ostot ja palvelut 38,9 Milk producers 747 41.3 Henkilöstökulut 12,2 PoistotPurchases and services 4,7 703 38.9 RahoituskulutPersonnel costs 0,3 221 12.2 VerotDepreciations 0,4 85 4.7 Financing costs 6 0.3 Taxes 8 0.4

PAYMENTS TO VALIO LTD OWNERS 2016 2017 2018 2019 2020

Price paid for milk, MEUR 708 717 714 714 739 Dividends paid, MEUR 5 5 5 5 5 Interest on shareholder loans, MEUR 3 3 3 3 3 VALIO – SUSTAINABILITY REPORT 2020 105

VALIO GROUP FINANCIAL KEY FIGURES 2016–2020 2016 2017 2018 2019 2020

Milk volume taken in from the owners, mill. litres 1,861 1,837 1,821 1,792 1,807 REPORTING Net sales, MEUR 1,638 1,708 1,734 1,787 1,808 Balance sheet total, MEUR 1,252 1,193 1,150 1,122 1,171 Investments, MEUR 127 98 62 64 61 SCOPE Net sales/milk volume taken in, EUR/litre 0.88 0.93 0.95 1.00 1.00 We report Valio’s operational and sustainability results once per year in our Sustainability Report, applying the guidelines of the GRI Standard.

VALIO GROUP NET SALES AND PERSONNEL BY COUNTRY 2020 REPORT CONTENT: This Sustainability Report covers Valio’s activities NET SALES* PERSONNEL, PERSONNEL in 2020 and early 2021. It covers Valio’s operations in Finland and, in part, MEUR AVERAGE 31 DEC 2020 in its operating countries. In conjunction with the figures and other Valio Ltd 1,515 3,230 3,158 information, the relevant operations are specified. Valio Ltd’s net sales in Finland 1,062 Valio Russia 87 420 437 GOVERNANCE: Valio’s operations are guided by the Group’s base mission, Valio Baltic 125 483 493 goals, values, strategy, and governance policies. Our governance policies Valio Sweden 124 58 59 determine the composition of Valio’s Supervisory Board and Board of Directors, Valio USA 77 30 30 as well as the decision-making authority of the Valio organisation, such as Valio China 92 25 20 the General Meeting, the Supervisory Board, the Board of Directors, the CEO, Valio Group total 1,808 4,246 4,197 the Executive Board, the business units, group functions, and business processes. *) Net sales of Valio Ltd and its subsidiaries includes intra-group sale of MEUR 214. Valio’s governance model and its administrative remuneration systems are detailed in the “Governance and remuneration” section.

The principles and policies guiding Valio’s operations are available on Valio’s website read more >>> VALIO – SUSTAINABILITY REPORT 2020 107

GRI TABLE

NUMBER CONTENT LOCATION NOTES NUMBER CONTENT LOCATION NOTES

GRI 102: GENERAL DISCLOSURES 2016 4. GOVERNANCE 1. ORGANISATIONAL PROFILE 102-18 Governance structure 90-91 102-1 Name of the organisation Valio 102-35 Remuneration policies 90 102-2 Activities, brands, products, and services 8, 26, 60, 82 102-3 Location of headquarters Meijeritie 6, Helsinki, Finland 5. STAKEHOLDER ENGAGEMENT 102-4 Location of operations 112 102: 40-44 List of stakeholder groups 26-31 102-5 Ownership and legal form Valio’s owners and governance >>> 102-6 Markets served 112 6. REPORTING PRACTICE 102-7 Scale of the organisation 99, 103 102-45 Entities included in the consolidated Annual Report www.valio.com/sustainability/ 102-8 Information on employees 74-81; 98-101 financial statements and Financial reports-and-financial-statements/ 102-9 Supply chain 82-87 Statement 24 102-10 Significant changes to the organisation After cooperation negotiations, temporary layoffs were initiated 102-46 Defining report content and topic boundaries 3 and its supply chain at Valio Oy from 22.4.-31.12.2020 due to the coronavirus 102-47 List of material topics 12 pandemic-related reduced work volume and for financial reasons. 102-48 Restatements of information Global data collection and calculation have been harmonised The temporary layoffs were mostly short term and affected since the previous report. The report still contains some 265 employees in the head office functions. Adjustment information for Finland only; that information is clearly marked in measures were implemented also in other Valio countries. conjunction with the reported information. 102-11 Precautionary Principle 88 102-49 Changes in reporting The reporting of greenhouse gas emissions was further refined 102-12 External initiatives 26, 39 in 2020 with the addition of scope 3 categories 10, 11, and 12. 102-13 Membership of associations 30 Reporting follows an international protocol (ghgprotocol.org). 102-50 Reporting period 2. STRATEGY 102-51 Date of most recent report 15.5.2020 102-52 Reporting cycle calendar year 102-14 Statement from senior decision-maker 4-5 102-53 Contact point for questions [email protected]

regarding the report +358 10 381 2118 3. ETHICS AND INTEGRITY 102-54 Claims of reporting in accordance The GRI Standards 102-16 Values, principles, standards, 9, 65 with the GRI Standards are applied in the report and norms of behaviour 102-55 GRI content index 106 102-17 Mechanisms for advice and 68, 79 concern about ethics 102-56 External assurance The report is not assured externally VALIO – SUSTAINABILITY REPORT 2020 109

NUMBER CONTENT LOCATION NOTES NUMBER CONTENT LOCATION NOTES

GRI 103: MANAGEMENT APPROACH GRI 300: ENVIRONMENTAL TOPICS (GENERAL DISCLOSURE 2016) 103-1-3 Explanation of the material topic 3, 105 GRI 301: MATERIALS and its boundary 301-1 Materials used by weight or volume 96 Valio does not report raw material usage in renewable/non-renewable terms, GRI 200: ECONOMIC TOPICS as the information is not relevant to GRI 201 ECONOMIC PERFORMANCE (GENERAL DISCLOSURE 2016) Valio’s operations (food production from 201-2 Financial implications and other risks and 88-89 Valio does not report financial various ingredients). ­opportunities due to climate change estimates or outcomes. GRI 302: ENERGY 2016 201-3 Defined benefit plan obligations and www.valionelakekassa.fi/yritys/ 302-1 Energy consumption within the organization 53 other retirement plans 302-4 Reduction of energy consumption 53 Valio reports the reduction of energy consumption as a percentrage GRI 203: INDIRECT ECONOMIC IMPACTS (GENERAL DISCLOSURE 2016) of consumption. 203-1 Infrastructure investments and services 20-23, 103 ­supported GRI 303: WATER (GENERAL DISCLOSURE 2016) 203-2 Significant indirect economic impacts 20-23, 103 303-1 Water withdrawal by source 94 303-3 Water recycled and reused 95

GRI 204: PROCUREMENT PRACTICES (GENERAL DISCLOSURE 2016) GRI 304: BIODIVERSITY (GENERAL DISCLOSURE 2016) 204-1 Proportion of spending on local suppliers 82-87 304-1 Operational sites owned, leased, managed in, Valio’s production plants are not located or adjacent to, protected areas and areas of in or nearby areas that have an official GRI 205: ANTI-CORRUPTION (GENERAL DISCLOSURE 2016) high biodiversity value outside protected areas. environmental protection class. 205-2 Communication and training about 11, 65, 83 In 2020, 16 reports ranging from 304-2 Significant impacts of activities, products, 45 Based on the observations included in ­anti-corruption policies and procedures inappropriate behaviour to violations of the and services on biodiversity the environmental permits, it can be Code of Conduct and sustainability were estimated that Valio’s production plant received through the whistleblowing channel. operations have no significant impacts on nature. Dairy farm operations have

GRI 206: ANTI-COMPETITIVE BEHAVIOUR 2016 a significant impact on preserving the biodiversity of agricultural environments. 206-1 Legal actions for anti-competitive behaviour, Nothing noteworthy in 2020. Valio’s guidelines for responsible milk anti-trust, and monopoly practices production include guidance on taking biodiversity into consideration. VALIO – SUSTAINABILITY REPORT 2020 111

NUMBER CONTENT LOCATION NOTES NUMBER CONTENT LOCATION NOTES

304-4 Endangered species There are nesting areas of Siberian flying GRI 307: ENVIRONMENTAL COMPLIANCE squirrels in the vicinity of two sites in 307-1 Non-compliance with environmental In the second and third quarters of 2020, Valio Oy Jyväskylä’s dairy Finland, and there are Siberian flying laws and regulations did not meet the environmental permit requirements regarding squirrel migration routes in the vicinity the BOD load of wastewater. As a result of corrective actions, the of the headquarters. permit conditions have been met since the fourth quarter of 2020.

Otherwise, there were isolated emissions with momentary adverse GRI 305: EMISSIONS (GENERAL DISCLOSURE 2016) impacts to wastewater treatment. The incidents were reported to 305-1 Direct (Scope 1) GHG emissions 35 the environmental protection authorities in compliance with the 305-2 Energy indirect (Scope 2) GHG emissions 35 environmental permit conditions. 305-7 Nitrogen oxides (NOX), sulphur oxides (SOX), 93 and other significant air emissions GRI 400: SOCIAL TOPICS GRI 401: EMPLOYMENT (GENERAL DISCLOSURE 2016) GRI 306: EFFLUENTS AND WASTE (GENERAL DISCLOSURE 2016) 401-1 New employee hires and The number of new/changed employment relationships in 306-1 Water discharge by quality and destination 95 employee turnover Finland was 892. The number of ceased employment 306-2 Waste by type and disposal method 96 Valio Oy itself does not treat waste that relationships was 789. The figures include temporary and is classified as hazardous. Valio has a permanent employment relationships. contract with Fortum Waste Solutions Oy, GRI 403: OCCUPATIONAL HEALTH AND SAFETY (GENERAL DISCLOSURE 2016) which has the required permits to take 403-2 Types of injury and rates of injury, occupational 81, 101 Valio does not report country- or care of the treatment of hazardous waste. diseases, lost days, and absenteeism, and gender-specific information. 306-6 Water bodies affected 95 All Finnish production plants are connected number of work-related fatalities to municipal wastewater treatment plants. GRI 404: TRAINING AND EDUCATION (GENERAL DISCLOSURE 2016) Satisfying the emission conditions set for 404-2 Programs for upgrading employee skills 74-77 them ensures that the condition and quality and transition assistance programs of water systems does not deteriorate. GRI 419: SOCIO-ECONOMIC COMPLIANCE (GENERAL DISCLOSURE 2016) The Estonian sites have their own 419-1 Non-compliance with laws and regulations Nothing noteworthy in 2020. dedicated wastewater treatment plants that in the social and economic area are overseen by the environmental protection authorities. VALIO – SUSTAINABILITY REPORT 2020 113

DAIRY AND FOOD COMPANY THE MOST INNOVATIVE OWNED BY FARMERS DAIRY AND FOOD COMPANY IN THE WORLD We create wellbeing and taste experiences, sustainably. Our products are made from clean Finnish milk and other ingredients. We have exports to around 60 countries.

PERSONNEL 31 DEC 2020 FOUNDED IN Finland 3,158 4,300 Baltics (Estonia) 487 DAIRY FARMS NOBEL PRIZE IN Russia 416 1905 OWN VALIO Sweden 59 CHEMISTRY Valio Ltd (Finland) USA 30 Group headquarters: Helsinki China 20 12 production plants around the country Total 4,170 Valio Russia EMPLOYEES Valio Sweden Headquarters: St. Petersburg ALL PROFITS Headquarters: Stockholm AROUND Production: Ershovo FOR THE MILK THAT’S ZERO THE WORLD Valio USA Valio Baltics AMONG THE TRACES OF Headquarters: Parsippany, Headquarters: Tallinn FARMS CLEANEST IN ANTIBIOTICS Production: Võru and Laeva 4,000 New Jersey THE WORLD IN MILK Valio China Headquarters: Shanghai

EXPORTS TO OVER 12 PLANTS 1.8 IN FINLAND , 2 IN ESTONIA, BN 60 1 IN RUSSIA TURNOVER COUNTRIES